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England and Wales High Court (Patents Court) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Patents Court) Decisions >> Panasonic Holdings Corporation v Xiaomi Technology UK Ltd & Ors [2024] EWHC 1733 (Pat) (05 July 2024) URL: http://www.bailii.org/ew/cases/EWHC/Patents/2024/1733.html Cite as: [2024] EWHC 1733 (Pat) |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY LIST (ChD)
PATENTS COURT
B e f o r e :
____________________
| PANASONIC HOLDINGS CORPORATION (a company incorporated under the laws of Japan) |
Claimant |
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| - and – |
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| (1) XIAOMI TECHNOLOGY UK LIMITED (2) XIAOMI INC (a company incorporated under the laws of the People's Republic of China) (3) XIAOMI COMMUNICATIONS CO LTD (a company incorporated under the laws of the People's Republic of China) (4) XIAOMI HK LIMITED (a company incorporated under the laws of Hong Kong Special Administrative Region of the People's Republic of China) (5) GUANGDONG OPPO MOBILE TELECOMMUNICATIONS CORP, LTD (a company incorporated under the laws of the People's Republic of China) (6) OPPO MOBILE UK LIMITED (7) UNUMPLUS LIMITED |
Defendants |
____________________
MR ANDREW SCOTT KC and MS ISABEL JAMAL (instructed by Bristows LLP) on behalf of the Claimant.
Hearing dates: 23 to 25 April 2024
____________________
Crown Copyright ©
Mr Justice Leech:
I. The Applications
II. Procedural History
(1) The English Proceedings
"22. By (i) signing the Claimant's Licensing Declarations and/or any of them and (i) returning those signed Declarations to the Director-General of ETSI, the Claimant is bound to enter into good faith negotiations with a view to concluding, alternatively, to grant, licences of its ESSENTIAL IPR on terms and conditions which are in accordance with Clause 6.1 of the ETSI IPR Policy (the "FRAND Commitment")."
"27. In the premises, the Claimant has had to enforce its patents and rely on the Court for the determination of FRAND licence terms. The Claimant considers that the licence terms set out in the term sheet at Annex 9 are FRAND and is willing to license the Defendants on those terms or on such other terms as the Court considers to be FRAND. Further particulars as to the Claimant's case on the meaning of FRAND, why the terms in Annex 9 are FRAND, the conduct of the parties in the licensing negotiations, and the relief the Claimant seeks will form the subject of a FRAND Statement of Case in due course."
"On the assumption that the Claimant will, contrary to its current position, provide an unconditional undertaking to enter into the Court-Determined Licence, Xiaomi would be prepared to unconditionally undertake to this Court that it will enter into the Court-Determined Licence, which, for the avoidance of doubt, is a licence agreement covering the Panasonic Portfolio in the form that is determined to be FRAND at the FRAND trial in these proceedings or, to the extent that there are any appeals of the judgment of the FRAND trial, a licence agreement that is finally determined to be FRAND on appeal."
"3. The central point that has led to the argument today is that following the short adjournment last Friday, it appeared that a regime could be put in place whereby Panasonic would give an undertaking not to enforce injunctions obtained in the UPC or in Germany pending the FRAND trial here. The matter was presented to me by Ms. Jamal, who appeared for Panasonic then, as she does today, on the basis that the wording needed to be tidied up, which I understood, but as I explained in paragraphs 21 and following of my judgment, I did not want to make an important case management decision about the timing of the FRAND trial only to find that I was doing so on the wrong basis and that is the reason why I made the adjournment until today.
4. In some dimensions, significant progress has been made and it is therefore important to record that matters have been put in place so that, as Xiaomi record in their skeleton for today, at paragraph 10, Xiaomi and Panasonic have agreed to give reciprocal undertakings to enter into a FRAND licence, that that will deal with the position that the licence might be adjusted on appeal and that the technical trials should be stayed. Xiaomi also confirmed that, provided that the FRAND trial was expedited, the FRAND trial need not include issues of Panasonic's past conduct or breach of competition law and Xiaomi, Panasonic and, indeed, Oppo, are close on the time that will be needed for the stripped-down FRAND trial of that kind, which is to say between ten and 15 days in court.
6. The matter, therefore, was adjourned on that basis and the parties went away to think about their positions. Progress in the respects that I have indicated was made and set out in correspondence but, crucially for today's hearing, having thought the matter over, Panasonic decided that it would not, in fact, be willing to give an undertaking not to enforce injunctions obtained in the UPC or Germany pending the FRAND trial here, even if Xiaomi were completely bound to enter into a licence on the terms decided here.
7. That is characterised by Panasonic in its skeleton for today as matters having "moved on". I do not regard it as matters moving on; I regard it as a very substantial and important change of position by Panasonic. It might be going slightly too far to say that Panasonic resiled from what it said last week, but only very slightly too far. Panasonic has rowed back very considerably."
"9. Panasonic, therefore, wants to preserve its option to obtain and enforce an injunction against Xiaomi, despite the fact that Xiaomi is committed to take a FRAND licence on terms decided by this court, as Panasonic sought by the very bringing of these proceedings and, furthermore, Panasonic wants to preserve its option to do that, even in the last few months before the FRAND trial, were that to be listed, for example, in October next year, because although last week Ms. Jamal made timing submissions on the basis that enforcement normally takes place following the appellate stage in Germany (and it may turn out as well, maybe, in due course, who knows, in the UPC), today she makes clear that Panasonic wishes to preserve the right to seek to enforce a first instance injunction, which could come next summer."
"Mr. Segan says that Xiaomi may have to, in those scenarios, think of interim measures, such as seeking a declaration that Panasonic is not a willing licensor or seeking a declaration of an interim licence to cover the position until the full FRAND trial. I express no opinion about the prospects of success of either of those routes, but I do understand Xiaomi's concerns in those regards. I also accept and endorse Mr. Segan's contention that Xiaomi has done what it is that the UK court has expressed that an implementer in its position ought to do, which is commit to FRAND terms and move efficiently towards their determination."
"30. I have a lot of sympathy for Xiaomi's position. I have no sympathy at all for Panasonic's position, which I think is extremely regrettable for all the reasons that I have set out earlier in this judgment. But it would be folly, I think, to try to cram the FRAND trial into a slot in July and I think it would be unfair on Oppo to do that.
31. The scenario where Panasonic seeks an injunction from an UPC or a German court will have to be dealt with by Xiaomi's submissions there that it is inappropriate and/or by the sort of applications I have indicated already can be made (without, as I said and at the risk of repeating myself, making any indication myself about whether those would succeed or fail).
32. I do formally record - and I imagine that my Continental colleagues would want to know this - that by reason of the procedural steps that have been put in place by both sides, that is to say Panasonic and Xiaomi, I am operating on the assumption, which I am sure is justified, that a FRAND licence between those parties will definitely result from the FRAND trial, which I will direct to take place next autumn, for the reasons I have indicated."
"AND UPON the Claimant giving the following undertakings to the Court (the "Panasonic Undertakings"): 1. The Claimant, on behalf of itself and its affiliates, hereby unconditionally undertakes to the Court that: (a) it will (i) offer a licence agreement to the Xiaomi Defendants covering the Panasonic Portfolio (as defined in paragraph 2 of the Particulars of Claim) in the form that is determined to be FRAND by the High Court at the FRAND Trial (defined in paragraph 1 of this Order) in these proceedings (the "Court-Determined Licence") (including for the avoidance of doubt such terms the Court considers it appropriate to make conditional pending any appeal), and (ii) upon acceptance by Xiaomi, enter into the Court-Determined Licence by expiry of the time period specified by the High Court within which the Xiaomi Defendants and Claimant must enter into the Court-Determined Licence; and (b) to the extent that there are any appeals of the judgment (including any consequentials judgments) affecting the form of the Court-Determined Licence, it will perform such steps as are required to (i) amend the form of the executed Court-Determined Licence to incorporate any amendments to the Court-Determined Licence that are finally determined to be FRAND on appeal in these proceedings, and (ii) incorporate any such amendments into the Court- Determined Licence by expiry of the time period specified by the relevant appeal court within which the Xiaomi Defendants and Claimant must incorporate such amendments.
AND UPON the Xiaomi Defendants giving the following undertaking to the Court (the "Xiaomi Undertakings"): The Xiaomi Defendants, on behalf of themselves and their affiliates, hereby unconditionally undertake to the Court that: 1. they will accept and enter into the licence agreement offered by the Claimant pursuant to the Claimant's undertaking 1(a) above by expiry of the time period specified by the High Court within which the Xiaomi Defendants and Claimant must enter into the Court-Determined Licence; and 2. to the extent that there are any appeals of the judgment (including any consequentials judgments) affecting the form of the Court-Determined Licence, they will perform such steps as are required to (i) amend the form of the executed Court-Determined Licence to incorporate any amendments to the Court- Determined Licence that are finally determined to be FRAND on appeal in these proceedings, and (ii) incorporate any such amendments into the Court-Determined Licence by expiry of the time period specified by the relevant appeal court within which the Xiaomi Defendants and Claimant must incorporate such amendments.
(2) The Interim Licence Application
(3) The Draft Statements of Case
"21A.1 The Claimant would not be performing its FRAND Commitment in good faith and/or acting as a willing licensor in seeking (and/or enforcing, if granted) any injunctive relief before this Court in respect of the patents in the Panasonic Portfolio absent a breach of the Xiaomi Undertaking;
21A.2 The only possible purpose and/or effect of seeking (and/or enforcing, if granted) injunctive relief in respect of any patent(s) in the Panasonic Portfolio in any other jurisdiction pending the settlement of the Court-Determined Licence would be to apply undue commercial pressure on Xiaomi to conclude a licence agreement on supra-FRAND and/or excessive terms before the Court-Determined Licence is available for execution;
21A.3 The pursuit by a SEP holder of a commercial and/or litigation strategy with the purpose and/or effect of extracting supra-FRAND and/or excessive terms for its ETSI SEPs, including as described above, amounts to a breach of the FRAND Commitment - in particular (without limitation), the pursuit of such a strategy is inconsistent with the SEP holder's obligation to conduct itself in good faith towards a beneficiary of the FRAND Commitment and as a willing licensor in the period prior to the conclusion of a licence;
21A.4 The FRAND Commitment instead requires the Claimant to agree to enter, and to enter, into an "Interim Licence" (as described further below) with Xiaomi pending the settlement of the Court-Determined Licence at first instance - failing which the Claimant would be in breach of the FRAND Commitment and is not a willing licensor; and
21A.5 Further or alternatively, a willing licensee such as Xiaomi should in any event have the right or ability to apply to the Court for a determination of an appropriate interim licensing framework, including payments into Court (subject to a "true-up" following determination of the Court-Determined Licence), to enable that licensee further to demonstrate and manifest its willingness to enter into a licence on FRAND terms settled by the Court."
"63C. It is averred that the Claimant's continued pursuit of injunctive relief in the German and/or UPC Proceedings in circumstances where the Reciprocal Undertakings have been given can only have the purpose of placing undue commercial pressure on Xiaomi to conclude a licence on supra-FRAND terms prior to the settling of the Court- Determined Licence, and does place such commercial pressure on Xiaomi. It is averred that the Claimant's conduct in this regard is inconsistent with its obligation under the FRAND Commitment to negotiate in good faith: see paragraph 18 above.
63D. In the aforesaid circumstances, it is averred that the Interim Licence that the Claimant is required to agree to enter, enter into or abide by in order to comply with its FRAND Commitment has the terms contemplated in paragraph 63E or, in the alternative, the following terms:
63D.1 It is a worldwide licence covering the Panasonic Portfolio;
63D.2 It has an "Effective Date" from the date on which its terms are determined by the Court and remains in force until the parties enter into the Court-Determined Licence in accordance with the Reciprocal Undertakings;
63D.3 It includes a mechanism (e.g ., standstill, "pick right", covenant not to sue or similar mechanism) that is sufficient to otherwise ensure global patent peace between the Claimant (and its affiliates) and Xiaomi Defendants (and their affiliates) during the interim period, being the period from the Effective Date until the determination of the Court-Determined Licence and subsequent entry into that licence pursuant to (1)(a) of Recital 4 of the Undertakings Order and (1) of Recital 5 of the Undertakings Order ("Interim Period");
63D.4 It provides for the Xiaomi Defendants to pay into Court a reasonable royalty that is compliant with FRAND requirements during the Interim Period as assessed by the Court (the "Reasonable Interim Royalty"), in accordance with a schedule to be determined by the Court:
63D.5 It provides for a reconciliation between the FRAND royalty in the Court-Determined Licence and the Reasonable Interim Royalty; and
63D.6 Such other terms as the Court considers necessary or appropriate."
"3G. Xiaomi, accordingly, asks the Court to grant declaratory relief (including to enforce the Claimant's FRAND Commitment):
63G.1 As to the terms of the Interim Licence, including the Reasonable Interim Royalty: and
63G.2 That the Claimant is in breach of its FRAND Commitment and/or is an unwilling licensor in the event that it does not (i) undertake prior to the determination of the terms of the Interim Licence to enter into the Interim Licence, or (ii) enter into the Interim Licence within 7 days of it being determined, or (iii) undertake within 7 days of the determination of the Interim Licence to comply with the terms of the Interim Licence as if it was in full force and effect.
63H. It is averred that such declaratory relief would serve the useful purposes of, inter alia. (i) clarifying the parties' respective rights and obligations pursuant to the FRAND Commitment, (ii) facilitating the early conclusion of an interim licence between the Claimant and Xiaomi covering the Panasonic Portfolio which would enable a FRAND licence to be settled by this Court without the application of undue commercial pressure to Xiaomi during the period in which this Court is settling the Court-Determined Licence, and/or (iii) enabling Xiaomi to establish an appropriate interim regime which further demonstrates its willingness as a licensee under the Panasonic Portfolio, a factor of relevance to whether injunctions will be granted prior to a FRAND licence being settled and concluded."
"11A. As to paragraph 21A: a. Insofar as the paragraph is premised on the allegation that an executed FRAND licence between Panasonic and the Xiaomi Defendants could only result from a "Court-Determined Licence" in these proceedings, that is denied. It remains open to the parties sooner to agree a FRAND licence, and it is Panasonic's preference that they do so and thereby avoid the costs of these proceedings. Panasonic's approach in this regard accords with the ETSI IPR Policy, which recognises the importance of parties entering into negotiations to try to agree FRAND licence terms."
"33J. Paragraph 63H is denied. In particular:
a. It would be wrong in principle for the English Court to make declarations solely for the purpose of influencing decisions by foreign courts. Insofar as there are exceptions to that principle in cases where the English Court has exclusive jurisdiction or is asked to declare rights under English law, those exceptions are irrelevant to the Interim Licence Counterclaim
b. The alleged useful purposes of the declarations sought by the Interim Licence Counterclaim, as identified by the Xiaomi Defendants in paragraph 63H, properly construed, amount to attempts to obtain declarations solely to influence decisions of the German Courts and/or the UPC in respect of whether or not to grant injunctive relief in those jurisdictions, which is a matter which those courts alone are seised, in respect of which the English Court has no jurisdiction (let alone no exclusive jurisdiction), and which are not governed by English law. As such, they provide no legitimate basis for the English Court to grant the relief sought in paragraph 63G ("the paragraph 63G Relief") or otherwise by the Interim Licence Counterclaim.
c. Purpose (i) is irrelevant in the context of the proceedings with which the English Court is seised. That is so in particular in the light of the Reciprocal Undertakings and the fact that Panasonic does not, absent a breach of the Xiaomi Undertakings, seek injunctive relief in this Court. In the context of the proceedings before this Court, there is no need and it would serve no useful purpose to clarify the "parties' respective rights and obligations pursuant to the FRAND Commitment' so far as concerns the matters raised by the Interim Licence Counterclaim, i.e. Panasonic's conduct in the proceeding before the German Courts and the UPC and the entitlement to the Interim Licence that is asserted by the Xiaomi Defendants as a result of it.
D. Purpose (ii) is premised on the false basis that, if this Court grants the paragraph 63G Relief, an interim licence will result between Panasonic and Xiaomi. That premise is false because in that scenario, Panasonic will not enter into the Interim Licence. Even if that were otherwise, the entry into an interim licence would serve no useful purpose in the context of the proceedings before the English Court, in particular in the light of the Reciprocal Undertakings and the fact that Panasonic does not, absent a breach of the Xiaomi Undertakings, seek injunction relief in this Court.
e. Further, the assertion in respect of purpose (ii) that the early conclusion of an interim licence would remove the alleged "application of undue commercial pressure to Xiaomi during the period in which this court is settling the Court Determined Licence" reveals the Xiaomi Defendants' true purpose in seeking the declarations sought by the Interim Licence Counterclaim is to enlist the English Court in pressuring Panasonic to cease pursuing its claims for patent infringement in the German and UPC Proceedings, that being the only conduct which the Xiaomi Defendants allege will or may place undue commercial pressure on Xiaomi during that period (as per paragraph 63C). That would not be a useful purpose in the light of the principles exemplified by cases such as Teva v Novartis [2022] EWCA Civ 1617. It would also and in any case be an illegitimate purpose, involving the English Court in an improper and exorbitant interference with the jurisdiction of those foreign courts in respect of the proceedings with which they are seised.
f. In respect of purpose (iii), in the light of the Reciprocal Undertakings and the matters pleaded at paragraphs 11A(c) above, the Xiaomi Defendants do not need to establish an appropriate interim regime to "further demonstrate a willingness as a licensee under the Panasonic Portfolio" in the context of the proceedings before the English Court, so purpose (iii) has no relevance in this jurisdiction. Insofar as purpose (iii) is said to be relevant to the foreign proceedings, such a purpose is not a useful purpose in light of the principles exemplified by cases such as in Teva v Novartis [2022] EWCA Civ 1617. Further, considerations that go to the willingness of the parties for the purposes of considering whether injunctions will be granted in the foreign proceedings are matters properly for the relevant foreign courts alone, and the Xiaomi Defendants have put, and it is to be inferred intend to put, such matters before the German Courts and UPC: see paragraph 11A(d)(iv) above.
g. Further, even if (contrary to the above) it were appropriate in principle to grant declarations for the purpose of the proceedings before the German Courts and the UPC, it would be wrong in principle or otherwise inappropriate to do so where, as here, those declarations: (i) would not bind the German Courts and the UPC; (ii) would not have preclusive effect on the parties (whether by res judicata, estoppel or otherwise) as regards any cause of action or issue before the German Courts and the UPC; and (iii) are unlikely materially to influence the German Courts and the UPC in determining the matters with which they are seised."
"33L. Without prejudice to its position as set out above. Panasonic is willing to undertake to the English Court that if the contingencies at paragraph 33K(i)-(iii) occur, then upon the Xiaomi Defendants paying Panasonic the amount which Panasonic is contending in its FRAND statement of case is FRAND, Panasonic will not enforce any injunction arising from the Panasonic Portfolio that it may obtain against them from the German Courts or the UPC during the pendency of the Reciprocal Undertakings. For the avoidance of doubt, (i) if the sum owed under the Court- Determined Licence is less than the amount paid to Panasonic under this arrangement, Panasonic would undertake to repay to Xiaomi the difference between these two sums and (ii) these further undertakings would not be a licence and nor would they prevent Panasonic from otherwise pursuing its claims against the Xiaomi Defendants before the German Courts and the UPC."
(4) The FNC Application
(5) The Parties' Current Proposals
(1) The interim amount which Xiaomi was offering far exceeded the amount which would be payable for the Interim Period of approximately 12 months based on Xiaomi's pleaded per-unit royalty.
(2) It far exceeded the fourth offer which it had made earlier and covered a period which was substantially longer than the Interim Period which would be covered by the Interim Licence until the grant of the Court-Determined Licence.
(3) It far exceeded the amount which would be payable based on the per-unit royalty sought by Panasonic for the interim period.
(4) Notwithstanding that Xiaomi's position was that the interim amount was consideration only for an Interim Licence covering the Interim Period, the interim amount far exceeded the amount that would be payable even when considering Xiaomi's past sales.
"In response, on 10 April 2024, Panasonic made an Updated Offer to Xiaomi, which closely mirrors the situation that would arise were the parties to enter into a licence pursuant to the "Orange Book" mechanism available in Germany. The Updated Offer proposes that Xiaomi enters into a final FRAND licence for the full term sought by Panasonic at the FRAND Trial (namely 2011-2029), for the amount sought by Panasonic in its FRAND statement of case in these proceedings, but with a mechanism to "true up" (or down) the terms following the outcome of the FRAND Trial. Xiaomi has not accepted the Updated Offer, and has recently served evidence criticising its terms, and mischaracterising it as an "interim licence". It is not an interim licence. It is a solution that would enable Xiaomi to be immediately and fully licensed (both historically and in the future), and thereby put an end to any parallel foreign proceedings and with it the alleged illegitimate "pressure" that they are said to cause it."
(6) The German Proceedings
"(a) The Regional Court Mannheim has scheduled hearings in two out of the three Mannheim DE Proceedings on 26 July 2024 and 16 August 2024. Xiaomi requested that these hearings be rescheduled, and that request has been accepted for the hearing originally scheduled for 26 July 2024: that will now take place on 4 September 2024. Whilst the second hearing will also be rescheduled following Xiaomi's request, no date has yet been provided although I am told by Mr Waldeck und Pyrmont that it may take place in Autumn 2024.
(b) Oral hearings have now been scheduled in the UPC Mannheim Proceedings on 7-10 October 2024 (EP 724), 10-11 December 2024 (EP 270) and 4-5 February 2025 (EP 315) respectively. Under the UPC Rules of Procedure, the UPC endeavours to issue a decision on the merits in writing within six weeks of an oral hearing.
(c) In the Regional Court Munich I and although a formal summons has not yet been issued, the parties have been liaising with the Court in relation to hearings on 6 November 2024 (EP 559), 8 November 2024 (EP 834; EP 836) and 27 November 2024 (EP 042), with FRAND issues to be heard on 29 November 2024 (in respect of all four of the Munich DE Proceedings). Panasonic has informed the Regional Court Munich I that its patent attorneys have availability issues regarding 8 November 2024 (EP 386) and 27 November 2024 (EP 042), so it is possible the Regional Court Munich I will change those two dates. Given FRAND issues are relevant to all the foregoing cases, a judgment is possible at the end of the hearing on 29 November 2024 or more likely in a 4-6 week period thereafter (January- February 2025).
(d) Oral hearings have been scheduled in the UPC Munich Proceedings on 19-21 November 2024 in relation to EP 132 - in that action, Panasonic seeks an injunction spanning all 17 UPC Member States - and 28-31 January 2024 in relation to EP 163. These cases will be heard together with the parallel proceedings filed against OPPO entities in relation to the same patents. At this stage, no hearing date has been set in the remaining UPC Munich Proceeding concerning EP 854."
III. The ETSI IPR Policy
"3 Policy Objectives
3.1 It is ETSI's objective to create STANDARDS and TECHNICAL SPECIFICATIONS that are based on solutions which best meet the technical objectives of the European telecommunications sector, as defined by the General Assembly. In order to further this objective the ETSI IPR POLICY seeks to reduce the risk to ETSI, MEMBERS, and others applying ETSI STANDARDS and TECHNICAL SPECIFICATIONS, that investment in the preparation, adoption and application of STANDARDS could be wasted as a result of an ESSENTIAL IPR for a STANDARD or TECHNICAL SPECIFICATION being unavailable, In achieving this objective, the ETSI IPR POLICY seeks a balance between the needs of standardization for public use in the field of telecommunications and the rights of the owners of IPRs.
3.2 IPR holders whether members of ETSI and their AFFILIATES or third parties, should be adequately and fairly rewarded for the use of their IPRs in the implementation of STANDARDS and TECHNICAL SPECIFICATIONS.
3.3 ETSI shall take reasonable measures to ensure, as far as possible, that its activities which relate to the preparation, adoption and application of STANDARDS and TECHNICAL SPECIFICATIONS, enable STANDARDS and TECHNICAL SPECIFICATIONS to be available to potential users in accordance with the general principles of standardization.
4 Disclosure of IPRs
4.1 Subject to Clause 4.2 below, each MEMBER shall use its reasonable endeavours, in particular during the development of a STANDARD or TECHNICAL SPECIFICATION where it participates, to inform ETSI of ESSENTIAL IPRs in a timely fashion. In particular, a MEMBER submitting a technical proposal for a STANDARD or TECHNICAL SPECIFICATION shall, on a bona fide basis, draw the attention of ETSI to any of that MEMBER's IPR which might be ESSENTIAL if that proposal is adopted.
4.2 The obligations pursuant to Clause 4.1 above do however not imply any obligation on MEMBERS to conduct IPR searches. 4.3 The obligations pursuant to Clause 4.1 above are deemed to be fulfilled in respect of all existing and future members of a PATENT FAMILY if ETSI has been informed of a member of this PATENT FAMILY in a timely fashion. Information on other members of this PATENT FAMILY, if any, may be voluntarily provided.
5 Procedures for Committees
ETSI shall establish guidelines for the Chairs of COMMITTEES with respect to ESSENTIAL IPRs.
6 Availability of Licences
6.1 When an ESSENTIAL IPR relating to a particular STANDARD or TECHNICAL SPECIFICATION is brought to the attention of ETSI, the Director-General of ETSI shall immediately request the owner to give within three months an irrevocable undertaking in writing that it is prepared to grant irrevocable licences on fair, reasonable and non-discriminatory ("FRAND") terms and conditions under such IPR to at least the following extent:
- MANUFACTURE, including the right to make or have made customized components and sub-systems to the licensee's own design for use in MANUFACTURE
- sell, lease, or otherwise dispose of EQUIPMENT so MANUFACTURED;
- repair, use, or operate EQUIPMENT; and
use METHODS.
The above undertaking may be made subject to the condition that those who seek licences agree to reciprocate.
6.1bis Transfer of ownership of ESSENTIAL IPR
FRAND licensing undertakings made pursuant to Clause 6 shall be interpreted as encumbrances that bind all successors-in-interest. Recognizing that this interpretation may not RULES OF PROCEDURE apply in all legal jurisdictions, any Declarant who has submitted a FRAND undertaking according to the POLICY who transfers ownership of ESSENTIAL IPR that is subject to such undertaking shall include appropriate provisions in the relevant transfer documents to ensure that the undertaking is binding on the transferee and that the transferee will similarly include appropriate provisions in the event of future transfers with the goal of binding all successors-in-interest. The undertaking shall be interpreted as binding on successors-in-interest regardless of whether such provisions are included in the relevant transfer documents.
6.2 An undertaking pursuant to Clause 6.1 with regard to a specified member of a PATENT FAMILY shall apply to all existing and future ESSENTIAL IPRs of that PATENT FAMILY unless there is an explicit written exclusion of specified IPRs at the time the undertaking is made. The extent of any such exclusion shall be limited to those explicitly specified IPRs.
6.3 As long as the requested undertaking of the IPR owner is not granted, the COMMITTEE Chairs should, if appropriate, in consultation with the ETSI Secretariat use their judgment as to whether or not the COMMITTEE should suspend work on the relevant parts of the STANDARD or TECHNICAL SPECIFICATION until the matter has been resolved and/or submit for approval any relevant STANDARD or TECHNICAL SPECIFICATION. 6.4 At the request of the European Commission and/or EFTA, initially for a specific STANDARD or TECHNICAL SPECIFICATION or a class of STANDARDS/TECHNICAL SPECIFICATIONS, ETSI shall arrange to have carried out in a competent and timely manner an investigation including an IPR search, with the objective of ascertaining whether IPRs exist or are likely to exist which may be or may become ESSENTIAL to a proposed STANDARD or TECHNICAL SPECIFICATIONS and the possible terms and conditions of licences for such IPRs. This shall be subject to the European Commission and/or EFTA meeting all reasonable expenses of such an investigation, in accordance with detailed arrangements to be worked out with the European Commission and/or EFTA prior to the investigation being undertaken.
6bis Use of the IPR Licensing Declaration Forms
MEMBERS shall use one of the ETSI IPR Licensing Declaration forms at the Appendix to this ETSI IPR Policy to make their IPR licensing declarations."
"the Declarant hereby irrevocably declares that (1) it and its AFFILIATES are prepared to grant irrevocable licenses under its/their IPR(s) on terms and conditions which are in accordance with Clause 6.1 of the ETSI IPR Policy, in respect of the STANDARD(S), TECHNICAL SPECIFICATION(S), or the ETSI Project(s), as identified above, to the extent that the IPR(s) are or become, and remain ESSENTIAL to practice that/those STANDARD(S) or TECHNICAL SPECIFICATION(S) or, as applicable, any STANDARD or TECHNICAL SPECIFICATION resulting from proposals or Work Items within the current scope of the above identified ETSI Project(s), for the field of use of practice of such STANDARD or TECHNICAL SPECIFICATION; and (2) it will comply with Clause 6. 1bis of the ETSI IPR Policy with respect to such ESSENTIAL IPR(s)."
"4.1 Licensing terms and ex ante disclosure
Specific licensing terms and negotiations are commercial issues between the companies and shall not be addressed within ETSI. Technical Bodies are not the appropriate place to discuss IPR Issues. Technical Bodies do not have the competence to deal with commercial issues. Members attending ETSI Technical Bodies are often technical experts who do not have legal or business responsibilities with regard to licensing issues. Discussion on licensing issues among competitors in a standards making process can significantly complicate, delay or derail this process.
Without prejudice to ETSI IPR Policy and other sections of this Guide, voluntary, unilateral, public, ex ante disclosures of licensing terms by licensors of Essential IPRs, for the sole purpose of assisting members in making informed (unilateral and independent) decisions in relation to whether solutions best meet the technical objectives, are not prohibited under ETSI Directives. Licensing terms from such disclosures may, in some circumstances, improve transparency for individual members in considering technologies for inclusion in STANDARDS and TECHNICAL SPECIFICATIONS.
No detailed licensing terms should be available from ETSI to avoid a misleading impression. ETSI may act as a depository, where IPR owners (licensors) can make available information on how and where to access such disclosed licensing terms, and provide links to URLs of IPR owners, which contain the details of licensing terms and conditions, so that information about the availability of licenses can be disseminated to all users of ETSI standards.
However, this provision does not create any obligation for any member to disclose any licensing terms related to any of its IPRs. The lack of disclosure by a member of its licensing terms does not create any implication under the ETSI Directives. Specifically, the requested undertaking in writing of an IPR owner that it is prepared to grant licenses on fair, reasonable and non-discriminatory terms and conditions pursuant to Clause 6.1 of the ETSI IPR Policy is sufficient when selecting technologies for ETSI standards and technical specifications."
IV. Foreign Law
(1) French Law
"General Principles of French contract law
168. In French law, a contract is a concordance of wills of two or more persons intended to create, modify, transfer or extinguish obligations.
169. Contracts are formed through a sufficiently clear and precise offer followed by acceptance, either of which may be express or implied."
"Stipulation pour Autrui
Art. 1205. A person may make a stipulation for another person.
One of the parties to a contract (the 'stipulator') may require a promise from the other party (the 'promisor') to accomplish an act of performance for the benefit of a third party (the 'beneficiary'). The third party may be a future person but must be exactly identified or must be able to be determined at the time of the performance of the promise.
Art. 1206. The beneficiary is invested with a direct right to the act of performance against the promisor from the time of the stipulation .
Nevertheless, the stipulator may freely revoke the stipulation as long as the beneficiary has not accepted it.
The stipulation becomes irrevocable at the moment when the acceptance reaches the stipulator or the promisor.
175. The stipulation pour autrui ("SPA") is a legal mechanism whereby the parties to a contract, namely a stipulator and a promisor, immediately vest a third-party (the beneficiary) with a right against one of them (the promisor) even though that third-party is defined in the abstract, is not aware of the benefit of that right and has not accepted it.
176. As long as the third-party has not accepted the benefit of the right vested in it, the stipulator may revoke that right. By contrast, the promisor may not revoke the right vested in the beneficiary by the SPA.
177. The main legal effect attached to the SPA mechanism is expressed in article 1206 paragraph 1 of the Civil Code which creates an accessory right between the beneficiary and the promisor.
178. The beneficiary is not a party to the underlying agreement between the stipulator and the promisor. It is merely the beneficiary of a specific enforceable right derived from this contract and defined therein.
179. A third party will be a beneficiary of an SPA provided that third party satisfies the conditions for being a beneficiary set out in or objectively determinable by reference to the underlying contract between the stipulator and the promisor.
180. It is not necessary for the beneficiary to be determined when the underlying contract between the stipulator and the promisor is entered into. However, it must be possible to determine the beneficiary at the time the obligation undertaken by the promisor is to be performed.
181. The right vested in the beneficiary by the SPA must be determined or determinable, as is generally required by Article 1163 (set out below). There is a dispute as to whether there is a material difference in the law before and after the Reformed Civil Code (see below).
182. If the stipulation (i.e., the wording of the underlying contract between the stipulator and the promisor) is valid but nonetheless unclear or ambiguous, it will not undermine the legal force of the stipulation ; rather, the stipulation will have to be interpreted to see whom it is designed to benefit.
183. Acceptance of the SPA (express or implicit) makes it irrevocable. In cases where the SPA is subject to corollary obligations for the beneficiary, the role of the beneficiary's acceptance is not merely to accept the benefit but also to accept the debt."
"The ETSI undertaking creates an SPA
191. Following Unwired Planet v Huawei and Optis v Apple (UK), it is now well accepted that the ETSI undertaking creates an SPA or SPCA under French law.
Rules on Interpretation of Contracts
Art. 1188. A contract is to be interpreted according to the common intention of the parties rather than stopping at the literal meaning of its terms.
Where this intention cannot be discerned, a contract is to be interpreted in the sense which a reasonable person placed in the same situation would give to it.
Art. 1189. All the terms of a contract are to be interpreted in relation to each other, giving to each the meaning which respects the consistency of the contract as a whole.
Where, according to the common intention of the parties, several contracts contribute to one and the same operation, they are to be interpreted by reference to this operation.
Art. 1190. In case of ambiguity, a bespoke contract is interpreted against the creditor and in favour of the debtor, and a standard-form contract is interpreted against the person who put it forward.
Art. 1191. Where a contract term is capable of bearing two meanings, the one which gives it some effect is to be preferred to the one which makes it produce no effect.
Art. 1192. Clear and unambiguous terms are not subject to interpretation as doing so risks their distortion.
196. The principles governing interpretation of contracts should only be looked at where there is room for interpretation i.e. where the black letter text of the contract is obscure or ambiguous.
197. Where contractual interpretation is performed, it is common practice to do so using extrinsic materials, including, for example, negotiation documents and other materials relating to the period preceding the conclusion of the contract or relating to the context of the conclusion (collective agreements, individually negotiated contracts, etc.)."
"199. From a general standpoint, French law provides two alternative tests for the interpretation of contracts: (1) a subjective one, aimed at ascertaining the genuine common intent of the parties (if any), or (2) an objective one, by reference to the standard of the reasonable person. Under the rubric of the concept of the "common intention" of the parties, the French courts have commonly adopted an objective approach when no genuine common intent could be identified.
200. A French court may prefer an interpretation which allows a provision to bear legal effects and, therefore, which is compliant with the law. In the event of ambiguity, in accordance with Article 1191, a French court may prefer an interpretation of a contract which results in the contract complying with the law (e.g., competition law), rather than one which would infringe the law and call for sanctions. A meaning that would lead the provision to become void, ineffective or Inapplicable because it would, for example, qualify as an infringement of the law, may be less preferred.
201. The rules of interpretation also favour consistency with the contractual context. It follows that, when a text allows two meanings, it must be understood to have the meaning that reconciles best with other relevant terms of the relevant agreement(s)."
"134. It is common ground between the parties that, as a matter of French law, a contract must be negotiated, formed, and performed in good faith pursuant to Article 1104 of the Civil Code (Borghetti 1 [C1/1] §32; Stoffel-Munck 1 [Conf D1/1] §27), and that therefore a SEP holder is required under French law to perform the ETSI obligation in good faith .
135. It is also common ground that there is no definition of good faith for the purpose of Article 1104 of the Civil Code; and that applying that concept is a highly fact sensitive question, which would be assessed by a French Court "in concreto" (i.e. in light of all the facts and circumstances) (Borghetti 1 [C1/1] §33 and §38; Stoffel-Munck 1 [Conf D1/1] §§28-30).
136. Both experts agree however that, in broad terms, good faith requires a party to perform its obligation in such a way that is consistent with the "spirit" or "purpose" of the obligation, not just the black letter of the obligation (Borghetti 1 [C1/1] §33; Stoffel-Munck 1 [Conf D1/1] §36."
"6. Paragraph 53 of Xiaomi's skeleton states that my evidence "regarding the limits of what can be required by the principle of good faith" is "unclear". Two passages are quoted from my previous reports in relation to this. I am quoted as saying, in Borghetti 1, that good faith cannot be relied upon to "undermine the very substance of the rights and obligations legally agreed between the parties" (emphasis in Xiaomi's Skeleton). I am then quoted as saying, in Borghetti that good faith cannot "alter ... the very substance of the rights and obligations legally agreed between the parties" (emphasis in Xiaomi's Skeleton).
7. I wish to clarify that my view as to the limits on good faith has not changed between Borghetti 1 and Borghetti 2. Furthermore, the sentences quoted in paragraph 53 of Xiaomi's Skeleton from my two previous reports were not intended to convey different meanings.
8. Whilst it is true, as Prof. Stoffel-Munck sets out in paragraph 25 of Stoffel-Munck 2, that the phrase used in Les Maréchaux is that good faith does not authorize the Court to "undermine" the substance of the rights and obligations of the contract, that has been clarified in later cases to mean that good faith does not allow courts to "modify" (i.e. alter) the rights and obligations, as Prof. Stoffel-Munck himself states in paragraph 25 of Stoffel-Munck 2. In relation to this, I note that Prof. Stoffel-Munck states at paragraph 24 of Stoffel-Munck 2 that he agrees "with [my] view at paragraph 36 that Article 1104 cannot be relied upon to 'alter the other party's obligations". On this point therefore I do not understand there to be any dispute between Prof. Stoffel-Munck and me.
9. As I understand it, Prof. Stoffel-Munck and I also agree that, as there is no strict definition of what good faith requires, the limitations of good faith in the performance of a contract will always be fact and context specific. I noted at paragraphs 11 and 12 of Borghetti 2, that the essential aspect of good faith is that it requires parties to fulfil the spirit of the contract and not just stick to the "black-letter" which may, depending on the facts, oblige parties to behave in ways that are not clearly expressed in the contract. However, it remains the case that French Courts cannot go further so as to modify the parties' rights and obligations, a point on which Prof. Stoffel-Munck and I agree as I explain at paragraph 8 above. Therefore, Prof. Stoffel-Munck and I agree that there is no hard-edged position on what constitutes the limits of good faith in the performance of a contract as the question will always be one of fact and degree."
"Another example is a 1996 case before the Cour de cassation (see Exhibit PSM-21). The manager of 'Le Parc de Ramonville' condominium signed a contract with a company on 30 March 1982 for the supply of heating and hot water and for the maintenance of the heating and hot water installations. During the performance of the contract, the company did not inform the condominium manager of the existence of a new tariff offered by "Gaz de France' and introduced in 1985. The new tariff was more advantageous than the existing tariff under which the condominium was supplied and the company itself had benefited from the new tariff itself since 1 April 1986. The condominium manager brought an action against the company claiming a sum corresponding to the savings that could have been achieved had the condominium been switched to the new tariff. The condominium manager was successful at first instance, but the decision was overturned on appeal on the grounds that the company was not under a positive obligation to inform the condominium manager of the existence of the new tariff. On further appeal, the Cour de cassation quashed the decision of the Court of Appeal, holding that "the company commissioned by its customers to operate their heating and hot water supply system was required to do so in their best interests and, consequently, to inform them of any possibility of a favourable change in Gaz de France's tariffs; by failing to fulfil this obligation for more than a year and a half, the company failed in its duty to provide information and advice and incurred liability towards 'Le Parc de Ramonville' co-ownership; in ruling as it did, the Court of Appeal disregarded [Article 1134 para. 3 of the French Civil Code]."
"A 2017 case before the Cour de cassation (see Exhibit PSM-29) in relation to franchise agreement concluded in 2004 between Holder (as "Franchisor") and Ginvest (as "Franchisee") granting exclusivity to the Franchisee to open bakeries under the 'Paul' brand. The Franchisor granted exclusivity to the Franchisee in return for a development commitment from the Franchisee to open 18 'Paul' stores within five years. The development commitment given by the Franchisee turned out to be optimistic and having opened five 'Paul' stores, the Franchisor terminated the franchise agreement and sued the Franchisee for damages resulting from the failure of the Franchisee to perform the development commitment. The Franchisee countersued for damages for wrongful termination of the franchise agreement. The Paris Court of Appeal found in favour of the Franchisee and awarded damages against the Franchisor. The Paris Court of Appeal held that the Franchisor was under a duty to renegotiate the franchise agreement in the event of the development commitment not being met and that termination of the franchise agreement amounted to a breach of Article 1134 (paragraph 3) of the French Civil Code (the predecessor to Article 1104). The Court of Appeal found that by failing to renegotiate, the Franchisor had breached its duty of good faith. The Cour de cassation upheld the Paris Court of Appeal's finding that the duty of good faith required the Franchisor to renegotiate the franchise agreement in those circumstances and "to offer acceptable terms" to the Franchisee."
(2) German Law
"26. I have been asked by Kirkland & Ellis to explain the legal basis of the FRAND Defence under German law.
27. The FRAND Defence in German law has its basis in Article 102 of the Treaty on the Functioning of the European Union ("TFEU"). As a rule, a SEP holder will be in a position of economic dominance not only with respect to the technical teaching of SEP(s) but also with the market served by SEP(s). SEP(s) by their very nature must be practised by every implementer seeking to deal in products that are compliant with the technical standard for which the SEP(s) are (alleged to be) essential. As a result, if the concerned SEP(s) provide a dominant market position, the SEP holder is able to prevent effective competition in the relevant market by acting independently of its competitors and customers (i.e., normal market forces that would otherwise serve to reduce the effect of any attempt by the SEP holder to prevent effective market competition are not applicable).
28. It is well established in Germany that an implementer of a SEP has a claim against the SEP holder under Article 102 TFEU where the SEP holder engages in behaviour that is abusive of its dominant market position. Such behaviour might include the SEP holder refusing to offer a licence to its SEPs or refusing to offer a licence other than on unFRAND terms. In Germany, an implementer's claim under Article 102 TFEU is usually raised as a defence in patent infringement proceedings, but in principle, it could also be asserted independently of any patent infringement proceedings (i.e., positively asserting a claim for a FRAND licence). I refer to an implementer's claim under Article 102 TFEU, when it is raised as a defence in patent infringement proceedings, as a "FRAND Defence".
29. The German Courts will only issue a binding decision on the subject matter of the dispute before it ("Streitgegenstand""). Pursuant to Section 253 (2) of the ZPO (sce Exhibit CA-4) the "subject matter of the dispute' is generally understood to mean the claim brought by the plaintiff based on the specific facts of the claim and the specific provisions of substantive law under which the claim is made, as set out in the plaintiff's Statement of Claim. 30. Where a claim is brought as a defence, as in the case of the FRAND Defence, the defence does not form part of the subject matter of the dispute and therefore the German Courts will not issue a binding decision in respect of a defence. The defence is only relevant insofar as the defence has a bearing on the Court's decision in respect of the subject matter of the dispute - i.c ., the plaintiff's claim."
(i) The FRAND Defence
"Step 1: The SEP holder must give notice of the infringement to the alleged infringer by identifying the SEP in question and specifying the way in which it has been infringed;
Step 2: The alleged infringer must then express willingness to conclude a licence agreement on FRAND terms;
Step 3: The SEP holder must provide the alleged infringer with an offer, in writing, on FRAND terms, specifying the particular royalty and the method of its calculation;
Step 4: The alleged infringer must respond to the SEP holder's offer "in accordance with recognised commercial practices in the field and in good faith." If the alleged infringer does not accept the SEP holder's offer, the alleged infringer is obliged to make a counter offer (promptly and in writing) on FRAND terms;
Step 5: If the counter offer is rejected, the alleged infringer must render accounts and information of its allegedly infringing acts.
Step 6: In addition, the alleged infringer is required to provide security in an appropriate amount."
"39. The Regional Courts Munich I and Mannheim spend little time, if any, considering the willingness of the licensor. A SEP holder is likely to be found unwilling only if it either did not notify the implementer of the alleged infringement and need to take a licence, i.e. the SEP holder did not comply with its requirements under Step 1, or if the SEP holder has made an offer that is determined to be "obviously unFRAND", in which case the SEP holder did not comply with its requirements under Step 3. As I explain below, the Regional Courts Munich I and Mannheim will not make a positive determination that an offer is FRAND in assessing the SEP holder's compliance with Step 3. Only if the SEP holder's offer is determined to be "obviously unFRAND", will said courts conclude that the SEP holder did not comply with its requirements under Step 3. In FRAND Defence II, the BGH held that any duties on a SEP holder other than its duty to notify under Step 1 are conditional on the implementer's expression of a clear and unambiguous willingness to license on FRAND terms. A finding of unwillingness on the part of the SEP holder would arise at this stage because the SEP holder's failure to notify an SEP-infringer or to make a FRAND-compliant licencing offer would not be deemed consistent with what a reasonable licensor interested in concluding a FRAND licence would do."
"61. It follows that (i) a finding that an offer is "not obviously unFRAND" is not the same as a finding that an offer is FRAND, and (ii) an offer that is found to be "not obviously un-FRAND" might in fact be 'supra-FRAND'."
"10. At paragraph 39, Professor Ann states that the "Regional Courts Munich I and Mannheim spend little time, if any, considering the willingness of the licensor". In so far as Professor Ann suggests that the Munich and Mannheim courts may not consider the willingness of the licensor at all, I disagree. I agree, however, that they will spend a proportionately longer amount of time assessing the willingness of the licensee. The reasons for this follows from the point I make above at paragraph 8, which was a factor in the judgments in Sisvel v Haier: the implementer is already using the SEP holder's patents so it is logical that the SEP holder wishes to receive a licence fee for that use. In contrast, an implementer may be content with the status quo: it is currently using the SEPs without paying any licence fee at all. That is why the Court needs to carefully consider whether the implementer is truly willing to agree a licence.
11. I pointed out in my First Report (para. 21) that the SEP holder typically has no interest in delaying the resolution of the conflict, because without such a solution it can neither enforce the SEPs nor receive any royalty for their use. The implementer, on the other hand, uses the patents (globally) without paying for this use. This is the reason why a "delaying tactic", as the CJEU has put it (Huawei v ZTE para. 65), can pay off for the implementer. However, such an implementer must pretend to be willing to take a licence in order not to be ordered to cease and desist, and this is precisely the reason why the German courts assess the implementer's behaviour with a critical eye. Their task is to distinguish between real and pretended willingness.
12. For German courts, it is the nature of the parties' negotiations that are key. Therefore, if an implementer applies to another court for a decision external to the negotiations with the SEP holder, it is crucial to determine whether such measures are really intended to and can promote the conclusion of a contract on FRAND terms in a timely manner, or whether it is only a matter of creating the impression of willingness in order to avoid an injunction or delay entering into a licence."
"18. I agree up to a point with what is stated in Ann 1 paragraph 61. It is true that a finding that an offer is "not obviously non-FRAND" is not the same as a finding that an offer is FRAND. However, I consider that some qualification is needed to the statement that an offer found to be "not obviously non-FRAND" might in fact be "supra-FRAND". It is true that an offer that is "not obviously non-FRAND" might be different to a court determined licence that results, e.g., from proceedings in the UK. However, it should be borne in mind that the judicial intention behind this stage of the consideration is simply to check whether or not the patentee has made a serious and credible proposal which was suitable for entering into negotiations. "If the patent proprietor were obliged to always immediately submit an offer anticipating the reasonable and mutually beneficial outcome of licence agreement negotiations, there would be no need for negotiations and also no counter-offer from the user who does not wish to accept the patent proprietor's offer" (Sisvel v Haier II para. 73). As correctly stated in Ann 1 paragraph 42, if the SEP holder's offer is classified as obviously not FRAND-compliant, it is not considered a (serious) offer, and an implementer cannot be considered unwilling merely by virtue of not responding to such an "offer". If however the SEP holder has made a serious proposal for a FRAND licence, the implementer must engage with the offer, even if it is not FRAND or not FRAND in every respect (Sisvel v Haier Il para. 72), and it is only if the implementer has failed to so engage that it runs the risk of any injunction. It is therefore not the case that the implementer would be expected to accept an offer that is not obviously non-FRAND or supra-FRAND.
19. The same is true for the counteroffer of the implementer. Since the SEP holder does not have to make a perfect FRAND offer it cannot expect a perfect counteroffer either. Instead, the offers should show that the parties are negotiating reasonably towards reaching an agreement.
20. If the parties do so the court may take a closer look at the patent holder's offer. For example, in HEVC Advance v Xiaomi/Vestel of 21 December 2021, the Düsseldorf Regional Court denied an injunction against an implementer and granted the FRAND defence as it found the implementer to be a willing licensee and the patent holder's offer to be non-FRAND.
21. Professor Ann states in paragraph 60 that, according to the established practice of the Munich I Regional Court, it is up to the SEP holder to decide which of its concluded licences it presents to the court for consideration. This may again be due to the fact that it is only a question of whether the SEP holder has made a serious proposal for a FRAND licence. Enforcement of an injunction granted at first instance"
(ii) Orange Book Offers
"65…The possibility of the Munich I and Mannheim Regional Courts determining a royalty rate only arises in circumstances where the SEP holder and the implementer agree upon a licence which includes a right under Section 315 of the German Civil Code (Bürgerliches Gesetzbuch) ("BGB") ("Section 315") (see Exhibit CA-15) for one party unilaterally to set the rate under that licence and for the rate set to be reviewed by the German Courts. For the avoidance of doubt, a specification under Section 315 would not be made in any pending patent infringement proceedings, instead, a fresh set of proceedings would need to be commenced by the party seeking a review of the rate. Where a party makes an offer of a licence to the other party that includes such a right under Section 315 BGB, it is called a "Section 315 Offer".
66. Where the parties enter into a licence pursuant to a Section 315 Offer, and the party entitled to unilaterally specify the rate under that licence specifics the rate, Section 315 BGB permits the other party to challenge the specified rate as not equitable and to request that a German Regional Court with jurisdiction to hear patent infringement proceedings replaces the rate set with a rate that said Regional Court considers 'equitable': the test of what is 'equitable' not being the same as the test of what is FRAND, although what is 'equitable' is also FRAND. 67. Where the implementer makes a Section 315 Offer under which the SEP holder has the right unilaterally to specify the rate, such an offer is referred to as an "Orange Book Offer" after the decision of the BGH in Orange Book Standard (sce Exhibit CA-16).
68. Orange Book Offers are a type of Section 315 Offer and are a mechanism designed to allow an implementer, in circumstances where there is an asymmetry of knowledge between the implementer and the SEP holder, to demonstrate its willingness to take a licence to the SEP holders patent(s). For example, only the SEP holder will have knowledge of its own licensing practices whereas implementers will often not have that knowledge. In such a scenario, the implementer may be unable to put forward an offer that could be considered FRAND. By making an Orange Book Offer, the implementer can offer a licence where terms other than the rate are agreed upon whilst (i) giving the SEP holder the right unilaterally to specify the royalty rate (in light of its knowledge of its own licensing practices), and (ii) retaining the right to have the royalty adjusted by a German Regional Court, should the rate set by the SEP holder be held to be inequitable by the German Regional Court."
(1) Professor Meier-Beck did not accept Professor Ann's evidence that there was no right to disclosure of the licences which the SEP holder had granted to other implementers and that an Orange Book Offer does not necessarily result in a FRAND offer. He expressed the opinion that the court would need to consider whether it was necessary for the SEP holder to disclose a wider range of licences to exclude un-FRAND or supra-FRAND terms.
(2) Professor Meier-Beck did not accept Professor Ann's evidence that the implementer must pay the royalties to the SEP Holder once an Orange Book Offer is accepted. His evidence was that both the CJEU and the BGH had opened up the possibility that the implementer could pay the relevant funds into an escrow account.
(3) Professor Ann did not accept Professor Meier-Beck's evidence that the German Courts would only set a new royalty rate if the licence agreed between the parties expressly included a right to apply to court under Section 315.
V. The Legal Principles
(1) The ETSI IPR Policy
"As to the first headline issue which I identified at the start, this is the second time the English Court has been called upon to determine what terms are FRAND. As to the second headline issue(s), aspects of the relevant principles have been addressed by Meade J. in the Optis v Apple litigation. Accordingly, my task has been significantly simplified by the relevant prior judgments in this area. Here I simply identify them and define my references to them:
i) The masterful analysis undertaken by Birss J. (as he then was) in the first case of this kind – Unwired Planet International Ltd v Huawei Technologies (UK) Ltd & Anr [2017] EWHC 711 (Pat) (the public version) ... 'UPHC' ), together with his later judgment on remedies [2017] EWHC 1304 (Pat) ('UPHC Remedies') .
ii) The judgments on appeal from Birss J: [2018] EWCA Civ 2344 ('UPCA') and [2020] UKSC 37 ('UPSC') .
iii) Two judgments of Meade J. in Optis Cellular Technology LLC & Ors v Apple Retail UK Ltd & Ors in which he had to consider aspects of the ETSI IPR Policy. First, in Trial B [2021] EWHC 1739 (Pat) ('Optis B') and then in Trial F: [2021] EWHC 2564 (Pat) ('Optis F') . Whilst preparing this judgment, the Court of Appeal heard and dismissed Apple's appeal and Optis' cross-appeal regarding Optis F: [2022] EWCA Civ 1411 ('Optis F CA')."
iv) The judgment of HHJ Hacon on the form of order hearing in Trial A in this litigation, in which he declined to grant any injunction: [2021] EWHC 3401 (Pat) ('Trial A FOO').
v) Although I have not found it necessary to discuss it, I have also had regard to the ruling of the CJEU in Huawei Technologies Co Ltd v ZTE Corp Case C-170/13, ECLI:EU:C:2015:477 [2015] 5 CMLR 14 ('Huawei v ZTE')."
"13. There has been much analysis in English authorities as to the precise nature of an implementer's FRAND defence where a patentee has given an undertaking pursuant to Clause 6.1. Fortunately, in the context of the two applications before me, there was no material disagreement between the parties. I therefore simply summarise the following aspects of the analysis applied by the English courts which I understand not to be the subject of much dispute. My intention in doing so is not to provide a comprehensive summary of all relevant principles, just those on which the parties were agreed and which help to put in context some of the arguments dealt with later on:
i) In England and Wales, an implementer's FRAND defence to infringement proceedings is analysed by reference to contractual principles with the courts construing, and giving effect to, the stipulation pour autrui governed by French law that is contained in Clause 6.1 (see [14] of Unwired Planet International Ltd v Huawei Technologies (UK) Ltd [2020] UKSC 37 ("Unwired Planet SC") ). In the course of adjudicating on the FRAND defence, an English court is entitled to determine the terms of a FRAND-compliant global licence of the relevant SEPs.
ii) Where a patentee has given an undertaking under Clause 6.1, that patentee has a contractual obligation to offer a global licence of the ETSI FRAND-encumbered SEPs on FRAND terms (see [258] of the judgment of Meade J in Nokia Technologies Oy v Oneplus Technology (Shenzhen) Co Ltd [2023] EWHC 1912 (Pat) ("Nokia v Oppo 2023 HC") ).
iii) In order to take the benefit of that contractual obligation, an implementer must establish that it is within the class of beneficiaries covered by the promise. Any implementer which wants a licence to work a relevant standard by any commercial activity and which intends to work the standard under a licence from the SEP owner falls within the class of beneficiaries of the stipulation ([285] of Optis v Apple (Trial F) [2021] EWHC 2564 (Pat) ).
iv) Built into that formulation of the class of beneficiaries is a concept of "willingness". An implementer that is not willing to take a licence on FRAND terms does not fall within the class. An implementer can demonstrate "willingness" by giving an undertaking to the English court that it will take a licence on such terms as the English court determines to be FRAND.
v) The English courts are likely to make an injunction against an "unwilling" implementer who is infringing SEPs on the basis that such an implementer is not a beneficiary of a SEP-owner's Clause 6.1 undertaking. Such an injunction is likely to be made whether or not the SEP-owner has made an offer of a FRAND global licence ([255] of Nokia v Oppo 2023 HC).
vi) The English courts will not grant a patentee an unqualified injunction restraining infringement by an implementer who is within the class of beneficiaries of an undertaking under Clause 6.1 (although they may grant a "FRAND injunction" restraining infringement until the implementer enters into a FRAND licence). The reason for that is that Clause 6.1 operates as a contractual derogation from a SEP owner's right under general law to obtain an injunction to prevent infringement of its patent (see [14] of Unwired Planet SC).
vii) Patent licences are complicated. It is quite possible that there can be a range of different licences of particular SEPs, none of which are identical, but all of which are FRAND. In such a case, a SEP owner could discharge its obligation under Clause 6.1 by offering whichever FRAND licence it chooses ([269] of Nokia v Oppo 2023 HC). Accordingly, if there are proceedings in different national courts, both of which will lead to the determination of the terms of a FRAND global licence, it is in principle up to a SEP owner to choose which court's formulation of a global FRAND licence it proposes to offer ([[271] and [272] of Nokia v Oppo 2023 HC). (I say that it is "in principle" open to the patentee to choose because the court may choose to enquire as to whether a patentee really is seeking to choose between two competing formulations of a FRAND global licence or whether it is seeking some other unrelated advantage.)
viii) It follows from the point made in paragraph vii) that, if there are proceedings in multiple jurisdictions that seek to determine the terms of a FRAND global licence, an implementer who is not prepared to commit to taking a licence on terms the English court determines to be FRAND, but instead will undertake only to accept a foreign court's formulation of a FRAND licence, may be labelled "unwilling" in English proceedings (Nokia v Oppo 2023 HC at [313])."
"142. Neither side before me suggests that the FRAND undertaking is specifically enforceable in the sense I have described. For my part I doubt that the FRAND undertaking can be specifically enforced in such a way that either party could legally be compelled to enter into a contract against their will. Certainly the implementer could not be so compelled and I doubt the patentee could be either. However a proper analysis of the full legal situation needs to have regard to the intellectual property rights which the FRAND undertaking relates to as well as the contractual position. It also needs to take into account competition law.
143. I do not believe it is necessary in order for the FRAND undertaking to be legally effective, for it to be true that the undertaking is specifically enforceable in such a way that the IPR holder could be compelled to enter into a contract against their will. In other words, even if a patentee cannot be compelled to enter into a contract by specific performance of the FRAND undertaking, that undertaking can still have substantive legal effect. As mentioned already FRAND is an objective standard. Courts concerned with patent cases in a number of countries around the world have set FRAND rates and this court will do so too. If a patentee refuses to enter into a licence which a court has determined is FRAND then, subject to the Vringo problem which I will consider below, a court can and in my judgment should normally refuse to grant relief for patent infringement. The converse applies to an implementer who refuses to accept a FRAND licence. In that case the normal relief for patent infringement should normally follow. Thus there is no need for contract law to go as far as creating a power to compel parties to enter into FRAND licences against their will because patent law already has the tools available to give legal effect to the FRAND undertaking."
"73. Secondly, Apple argue that the judge's interpretation is inconsistent with the policy objectives of the ETSI IPR Policy, which envisage that the SEP owner and the implementer will negotiate a licence on FRAND terms. This is another bad point. Of course it is preferable that SEP owners and implementers should negotiate licences. This is reflected in the ETSI IPR Policy and in paragraph 4.4 of ETSI's Guide on Intellectual Property Rights (which states that both members and non-members should engage in a negotiation process for FRAND terms). As the judge recognised at [78] and [128], the importance of negotiation has been emphasised both by the CJEU in Huawei v ZTE and by the Supreme Court in UPSC. The present issue arises, however, when the parties cannot agree terms. In those circumstances the national court must resolve the dispute, as paragraph 4.3 of the ETSI Guide states and as both the CJEU and the Supreme Court recognised. As discussed above, the twin purposes of the ETSI IPR Policy are to avoid hold up and hold out. To achieve this it is necessary, in the absence of agreement between the parties, for the national court to be able to enforce its determination against both parties. The national court can only enforce its determination against the SEP owner by withholding an injunction from the SEP owner if it is unwilling to abide by its ETSI Undertaking by granting a licence on the terms determined to be FRAND. The national court can only enforce its determination against the implementer by granting an injunction against the implementer if it is unwilling to take a licence on the terms determined to be FRAND.
74. Apple argue that the judge's construction would enable the SEP owner to avoid negotiations by (i) commencing proceedings, (ii) offering to enter into a Court-Determined Licence, (iii) demanding an undertaking to enter into Court-Determined Licence from the implementer and (iv) proceeding to a court determination of FRAND rates. What this argument ignores is that in order to get to step (iv) the patentee has to get a judgment from the court that the SEP is valid, essential and infringed. Furthermore, the argument is contrary to the very authority that Apple rely upon in support of it, namely Huawei v ZTE. As Apple themselves point out, the CJEU made it clear in at [63]-[66] that, in order to avoid abusing a dominant position, the SEP owner must present to the implementer a specific written offer for a licence on FRAND terms, the alleged infringer must diligently respond to that offer in good faith and without delaying tactics, and if it does not accept the SEP owner's offer the implementer must promptly submit a counter-offer that corresponds to FRAND terms. Thus, as Apple themselves argue in the context of their ground 3, both parties are obliged by competition law to negotiate. Moreover, experience shows that SEP owners and implementers invariably do negotiate, at least in the sense of making rival offers. This case is no exception, both Optis and Apple having made offers of what they respectively consider to be FRAND terms (although the judge was required to assume that Optis' offers were not FRAND, but on the contrary designed to disrupt negotiations, whereas Apple's offer was FRAND). There is nothing in the judge's interpretation to undermine this. As I have said, the judge's interpretation addresses the situation when negotiations are unsuccessful. Apple's interpretation would undermine the incentive identified by the Supreme Court for implementers to negotiate in a meaningful way."
"Oppo said that if the obligation on the patentee was to make a FRAND offer and which was capable of acceptance then there was no difference between interpreting the ETSI undertaking as one to grant licences and one to offer them. It said that in either case, if the implementer accepts then a licence results. I agreed that if a patentee makes an offer and the implementer accepts then a licence arises. So far as the existence of the licence is concerned it does not matter what the exact obligation on the patentee was. But there is still a very significant difference between a patentee having to make an offer which is capable of acceptance (as Nokia accepted it must be) and its granting a licence immediately on terms unknown at the election of the implementer, for all the reasons explored above."
"258. In the light of this analysis as a whole I agree with Nokia that Clause 6.1 requires the patentee to make a FRAND offer which is capable of acceptance, and actually FRAND. How does that then work in practice?
259. In the Patents Court, a FRAND matter such as this comes on for trial with a concrete set of terms for consideration (sometimes more than one set of terms if there has been more than one offer by the patentee, and there may also be offers from the implementer to consider; it does not matter to the practical point I am making).
260. The court applies the standard of whether the offer was FRAND or not. Because it is almost impossible to hit the nail on the head, it is usually found that the offer was not FRAND, but the court is able to say what would be FRAND. In cases to date the patentee has always (at least since Unwired ), as far as I am aware, given an undertaking before trial that it will offer what the court decides is FRAND. So it then complies with Clause 6.1 and its undertaking to the court by doing so. Similarly, implementers have usually, following a finding of infringement at a technical trial, given an undertaking that they will accept the offer at the FRAND stage (see Optis F, and the same applied as I understand it in InterDigital v Lenovo; it had not happened in Unwired Planet and a lesson was learned from that).
261. In the unlikely event that the patentee had not prior to trial given an undertaking to make an offer on the FRAND terms decided by the court then it would have the choice whether to do so, but if it did not then it would not have complied with Clause 6.1 and would not be entitled to an injunction. Such a situation ought to be unlikely to arise because the court typically expects the patentee to give such an undertaking to try to ensure that the parties' dispute is conclusively resolved by a licence coming into being.
262. As I have said above, it is possible that the court might say that more than one offer would be FRAND, and then the patentee can choose which to offer, but as the Court of Appeal said in Unwired Planet, this will be rare in practice."
(2) Anti-suit injunctions
"1. Under English law the court may restrain a defendant over whom it has personal jurisdiction from instituting or continuing proceedings in a foreign court when it is necessary in the interests of justice to do.
2. It is too narrow to say that such an injunction may be granted only on grounds of vexation or oppression, but, where a matter is justiciable in an English and a foreign court, the party seeking an anti-suit injunction must generally show that proceeding before the foreign court is or would be vexatious or oppressive.
3. The courts have refrained from attempting a comprehensive definition of vexation or oppression, but in order to establish that proceeding in a foreign court is or would be vexatious or oppressive on grounds of forum non conveniens, it is generally necessary to show that (a) England is clearly the more appropriate forum ("the natural forum"), and (b) justice requires that the claimant in the foreign court should be restrained from proceeding there.
4. If the English court considers England to be the natural forum and can see no legitimate personal or juridical advantage in the claimant in the foreign proceedings being allowed to pursue them, it does not automatically follow that an anti-suit injunction should be granted. For that would be to overlook the important restraining influence of considerations of comity.
5. An anti-suit injunction always requires caution because by definition it involves interference with the process or potential process of a foreign court. An injunction to enforce an exclusive jurisdiction clause governed by English law is not regarded as a breach of comity, because it merely requires a party to honour his contract. In other cases, the principle of comity requires the court to recognise that, in deciding questions of weight to be attached to different factors, different judges operating under different legal systems with different legal polices may legitimately arrive at different answers, without occasioning a breach of customary international law or manifest injustice, and that in such circumstances it is not for an English court to arrogate to itself the decision how a foreign court should determine the matter. The stronger the connection of the foreign court with the parties and the subject matter of the dispute, the stronger the argument against intervention.
6. The prosecution of parallel proceedings in different jurisdictions is undesirable but not necessarily vexatious or oppressive.
7. A non-exclusive jurisdiction agreement precludes either party from later arguing that the forum identified is not an appropriate forum on grounds foreseeable at the time of the agreement, for the parties must be taken to have been aware of such matters at the time of the agreement. For that reason an application to stay on forum non conveniens grounds an action brought in England pursuant to an English non-exclusive jurisdiction clause will ordinarily fail unless the factors relied upon were unforeseeable at the time of the agreement. It does not follow that an alternative forum is necessarily inappropriate or inferior. (I will come to the question whether there is a presumption that parallel proceedings in an alternative jurisdiction are vexatious or oppressive).
8. The decision whether or not to grant an anti-suit injunction involves an exercise of discretion and the principles governing it contain an element of flexibility."
"In Barclays Bank plc v Homan [1993] BCLC 680 , 686–688 Hoffmann J observed that the theory that an anti-suit injunction is not an intended interference with the affairs of a foreign court, because it merely operates in personam upon a person subject to the jurisdiction of the English court, is a more realistic description in some cases than in others. It is a fair description where the injunction is intended to enforce a contractual submission to the exclusive jurisdiction of the English court. But where the court is not enforcing a contractual right under English law, the normal assumption is that an English court has no superiority over a foreign court in deciding what justice between the parties requires and, in particular, that both comity and common sense suggest that the foreign judge is usually the best person to decide whether in his own court he should accept or decline jurisdiction, stay proceedings or allow them to continue. In other words, there must be a good reason why the decision to stop the foreign proceedings should be made by an English judge rather than a foreign judge, and cases where justice requires the English court to intervene will be exceptional. Hoffmann J recognised that exceptional cases cannot be categorised, but he instanced cases where a foreign court has by its own jurisprudence a long arm jurisdiction so extensive that to English notions it appears contrary to accepted principles of international law, and where the English court may feel it necessary to intervene by injunction to protect a party from the injustice of having to litigate in a jurisdiction with which he or the subject matter had little connection. There may also be cases in which the judicial or legislative policies of England and the foreign court are so at variance that comity is overridden by a need to protect British interests or to prevent what the English court regards as a violation of the principles of customary international law."
"3. Since Unwired Planet [2020] UKSC 37 it has been clear that the English court is prepared to set FRAND terms for a global SEP portfolio, not just for a SEP holder's UK portfolio. The English court is not the only jurisdiction which will do this. The courts of the People's Republic of China ('PRC') will also set global terms (see Sharp v OPPO). There is a potential for inconsistent determinations therefore and questions as to the correct approach to managing such potential parallel litigation are before the Court of Appeal this week (Nokia v OPPO on appeal from [2021] EWHC 2952 (Pat) with the Judge's permission).
4. Actual or potential concurrent proceedings on the same or similar subject matter in England and abroad may be undesirable from a costs perspective but are not of themselves regarded as an attack on the English court and the overseas proceedings may not be restrained by injunction. In the present context in particular, the risk of there being conflicting judgments from different courts is acknowledged to be an unfortunate consequence of the industry's decision to establish international standard setting organisations such as ETSI (Unwired Planet (above) [90]; Nokia v OPPO (above) [116])."
"I should briefly deal with the contention advanced by Optis that Apple should have done more to resist Optis' claims in the EDTX Proceedings by – for instance – seeking a stay in favour of these proceedings. That is a fundamentally bad point, because it assumes that which is not the case, namely that this is a question of competing proceedings. For the reasons I have given, it is not. This is a case where the outcome is not a judgment that competes with or is inconsistent with the EDTX Proceedings, but rather a Court-Determined Licence that will oblige Optis, as a matter of contract, to behave in a certain manner in relation to the EDTX Proceedings and any fruits of those proceedings (should any be paid by Apple to Optis). I have little doubt that if – prior to this point in time – Apple had applied to the US courts for a stay on forum grounds, the response would have been a negative one (and rightly so). The effects on the EDTX Proceedings arise as a matter of contract, not competing jurisdictions, and the contract in question is the Court-Determined Licence."
(3) Declarations
"It seems to me that, when considering whether to grant a declaration or not, the court should take into account justice to the claimant, justice to the defendant, whether the declaration would serve a useful purpose and whether there are any other special reasons why or why not the court should grant the declaration."
"Thirdly and most importantly, Judge Conti is an experienced and well respected Federal Judge sitting in the Federal Court in Pennsylvania. She has expressed no request or need to be instructed by the English court on what is, in its view and according to the applicable English conflict of laws rules, the applicable law of the policies. Nor is there any suggestion by Judge Conti that she would welcome being told of the English court's view on the elementary principles of English insurance law on the 'coverage issues' that would be raised in the proposed English proceedings. There is no other evidence that Judge Conti wishes to be assisted by the English court's views. Furthermore, it is clear from the transcript of the hearing before Judge Conti on 16 November 2011 that counsel for the Insurers disavowed the idea that the Insurers were starting proceedings in the English court to obtain 'more favourable treatment' there and counsel specifically accepted that English law could be applied in the Pennsylvania court. In these circumstances, for my part, I would regard the idea that the English court should give its unsolicited judgment as 'advice' to a Federal Judge in the US District Court for the Western District of Pennsylvania on elementary principles of English law, in the expectation or even hope that such a judgment would be 'at the very least … of considerable assistance' as both presumptuous and condescending. To use the phrase of Leggatt LJ in Barclays Bank plc v Homan it smacks of 'unacceptable hubris'."
"The conclusion I reach having considered these cases is that, as a matter of principle, it is wrong for an English court to make a declaration solely for the purpose of influencing a decision by a foreign court on an issue governed by the law of the foreign court. It is not the function of the courts of England and Wales to provide advisory opinions to foreign courts seised of issues which fall to be determined in accordance with their own laws. The English courts have no special competence to determine such issues. If anything, it is likely that they have less competence than the local courts. It makes no difference that the English court and the foreign court are applying the same basic law. Furthermore, comity requires restraint on the part of the English courts, not (to adopt Floyd LJ's graphic phrase) jurisdictional imperialism. Otherwise the English courts would be enabling forum shopping."
"47. That brings me to the reliance placed by TQD on the recently added claim for a declaration that ZyXEL are not "willing licensees", and, by reason of their conduct, are not entitled to a RAND licence. The utility of such a declaration is said to be that it would have effect as res judicata in proceedings in foreign jurisdictions were TQD to seek to obtain injunctive relief for infringement of patents in those jurisdictions.
48. There are a number of quite serious problems with this way of putting the case. First, there are no other proceedings in existence involving these parties anywhere in the world. The US proceedings involve US companies in the Unizyx group, not the two appellants. Moreover, we were not shown any evidence that TQD had any proceedings against the first or second appellants in imminent contemplation. The grant of relief in aid of foreign proceedings requires to be particularly closely scrutinised, but it is a step further to grant such relief in favour of foreign proceedings which are not extant and may never be started. Secondly, in this evolving jurisdiction, there is no single Europe-wide, let alone worldwide approach to the interaction between the RAND undertaking and the grant of relief for patent infringement. It is not possible to be at all sure that such a declaration would have the impact on any foreign proceedings which TQD hope for. Thirdly, the doctrine of res judicata is a technical one – Mr Saunders rightly goes no further than saying that the declaration may be res judicata in the foreign proceedings, without the benefit of any evidence as to how the finding of this court would be treated in the foreign proceedings. The foreign court may not have a doctrine of res judicata, or at least not one which recognises the decisions of a foreign court. Fourthly, the concept of a "willing licensee" is not in any sense an internationally recognised term of art. There will at least be potential for argument about whether the declaration is in fact of any assistance in the exercise being conducted in the foreign jurisdiction. Fifthly, TQD's contention is that ZyXEL are not "willing global licensees". Proceedings to obtain such a declaration should surely include other companies in the group, so that ZyXEL's global interests are represented.
49. The judge did not deal at all with these fundamental objections to the grant of declaratory relief of the kind now suggested. He observed cryptically at paragraph 43 that the waiver is arguably "just more hold-out", but he did not explain how this observation led to the conclusion that there was still some proper basis for useful declaratory relief concerning these specific defendants."
"52. These considerations force me strongly to the conclusion that the questions on which the court's declaratory judgment is sought are far better decided in the foreign court where those questions arise, if they ever do. It would be an exercise in jurisdictional imperialism to foist this court's view as to whether ZyXEL were unwilling licensees, or holding-out on an unknown foreign jurisdiction. Far less can it be said that it is in the interests of justice for it to do so."
"2. Lenovo and InterDigital have been litigating for some time in relation to the Cellular SEPs. In particular, there was litigation in England in which InterDigital asserted infringements of various "anchor" UK patents and Lenovo raised, as an aspect of its defence, an assertion that it was entitled to a worldwide licence on FRAND terms of InterDigital's Cellular SEPs. In March and June 2023, after a lengthy trial, Mellor J handed down two judgments that determined a FRAND lump sum for a global licence of the Cellular SEPs based on US$17.5 cents per device and determined the terms of a global licence (the "Cellular PLA"). Both sides have permission to appeal various aspects of Mellor J's determination to the Court of Appeal with that appeal due to be heard over five days in June 2024.
3. The Cellular PLA expired on 31 December 2023. InterDigital and Lenovo have held negotiations on the terms of a new FRAND licence of the Cellular SEPs for the period commencing on 1 January 2024. However, to date those negotiations have not concluded successfully.
4. On 22 September 2023, InterDigital filed proceedings (the "German Proceedings") seeking an injunction against Lenovo in the Regional Court of Munich on the basis of infringement of European Patent EP 2 127 420 B1 ("EP (DE) 420"), one of InterDigital's Cellular SEPs. The practice of the German courts is to determine questions of infringement and whether to grant an injunction before determining the validity of the patent in suit. Accordingly, the expression "German Proceedings" refers to the injunction proceedings and does not include validity proceedings that might follow. In its defence in the German Proceedings, Lenovo argues that it is willing to take a global licence of the Cellular SEPs on FRAND terms.
5. InterDigital has made two proposals to Lenovo for settlement of the German Proceedings: (i) an "Orange Book" offer (named after a case decided in the German Supreme Court) under which InterDigital says the German court would determine a FRAND-compliant royalty rate for a worldwide licence of the Cellular SEP and (ii) an offer of arbitration. To date Lenovo has not accepted either offer.
6. On 24 September 2023, Lenovo brought proceedings (the "English Proceedings") in England and Wales. By those proceedings, Lenovo invokes the procedure considered in Kigen (UK) Limited v Thales Dis France SA [2022] EWHC 2846 (Pat) and asks the English court to settle FRAND terms for a global licence, to commence on 1 January 2024, of a number of patents held by InterDigital extending beyond the Cellular SEPs. InterDigital disputes the jurisdiction of the English courts to determine such a licence in relation to some categories of patents specified in Lenovo's claim. However, it is now common ground that the English courts have jurisdiction to settle the terms of a FRAND-compliant global licence of Cellular SEPs with effect from 1 January 2024 although InterDigital considers that matter is best determined in Germany.
7. In its Particulars of Claim in the English Proceedings, Lenovo undertakes that it will enter into any licence agreement that the English court determines to be FRAND.
8. As will be seen, InterDigital argues that the English Proceedings overlap with, and interfere with, the German Proceedings at least to an extent. Mr Segan KC said on instructions in his submissions on behalf of Lenovo that Lenovo was unaware that the German Proceedings had been brought at the time they issued the English Proceedings.
9. A hearing of the German Proceedings is listed for one day on 18 April 2024."
"46. The key question that emerges from Teva v Novartis is whether making the Interim Licence Declaration would be only for the purpose of influencing the German Proceedings. If making that declaration would serve some other genuine useful purpose, then the fact that it might also be of some interest in the German Proceedings is not a negative, particularly since both Professor Chrocziel and Professor Meier-Beck are agreed that the German Proceedings will pay some regard to dispute resolution mechanisms proposed in non-German proceedings.
47. However, I consider that the court's exercise of discretion entitles it to take into account considerations of relative utility. If a party will obtain some, but little, benefit from an interim declaration in English proceedings and is in substance seeking the declaration to influence foreign proceedings, the court can treat that as a negative feature of the application."
"A consideration of the advantages and disadvantages of making the Interim Declaration also points against making it. Making the Interim Declaration would at most confer a slender benefit on Lenovo in the English Proceedings. The substantial benefit that Lenovo seeks from the Interim Declaration is the ability to influence the outcome of the German Proceedings. While I consider that InterDigital overstates matters in classifying the Interim Declaration as tantamount to an anti-suit injunction, I do not consider that it would be appropriate for the court to make the Interim Declaration for the substantial purpose of influencing the German Proceedings. I am reinforced in that view by my conclusions as to the commercial disbenefits that InterDigital would suffer if the Interim Declaration is made."
"109. Ericsson made the following specific criticisms of the claim for Interim Declarations:
i) There is no reasonable prospect of those declarations being made as against D2 which has no FRAND Commitment.
ii) There is insufficient specificity in the request for a declaration that a willing licensor and a willing licensee would take certain steps "in accordance with contractual obligations on the part of the Defendants by virtue of undertakings, declarations and/or declarations of essentiality made by or behalf of them to ETSI". In her oral submissions, Ms Abram argued that Lenovo had failed to plead a "legal springboard" that provided a basis for the English court to make findings as to how a "willing licensor" and "willing licensee" would behave in the period before trial.
110. The point made in paragraph 109i) is correct as far as it goes but relatively unimportant. The declarations sought are not as to rights and obligations of D2 specifically but rather as to how a "willing licensor" or "willing licensee" would behave. There is a drafting glitch in that the basis for determining the actions of a "willing licensor" and "willing licensee" is, in essence, the FRAND Commitment of the "Defendants". If it is accepted that D2 has no FRAND Commitment, the drafting glitch should simply be fixed by referring only to D1's FRAND Commitment. If it is asserted that D2 has FRAND Commitments as well, they should be specified.
111. I do not accept the argument made in paragraph 109ii). The FRAND Commitments of both Ericsson and of Lenovo, and the way those commitments are analysed by the English courts, necessarily mean that questions of "willingness" will arise in the English Proceedings. A licensee who is "unwilling" to take a FRAND licence risks being determined to fall outside the class of beneficiaries of a licensor's FRAND Commitment. A licensor who is perceived to be "unwilling" is unlikely to obtain an injunction restraining an implementer. The legal "springboard" for the claim for the Interim Declarations therefore consists of a combination of (i) undertakings that both D1 and C2 have given to ETSI, (ii) the way those undertakings are analysed in English infringement proceedings and (iii) the court's power under CPR 25 to make interim declarations as to how "willing" licensors and licensees might be expected to behave.
112. Ericsson's argument that an English court is unlikely to make the Interim Declarations was stronger. Ericsson argues that the Interim Declarations sought would simply amount to abstract statements of how hypothetical "willing licensors" and "willing licensees" might act which lack any utility in the English Proceedings. It argues that, if Lenovo seeks an interim licence, it should do so in jurisdictions such as Brazil and Colombia in which it is presently facing injunction proceedings rather than asking the English court to sort out what is essentially a foreign problem. It characterises the Interim Declarations as objectionable attempts to influence injunction proceedings that Ericsson has brought or might seek to bring in foreign courts. Ericsson goes as far as to argue that the Interim Declarations amounts to an anti-suit injunction by the back door.
113. There is force in those points. In the past weeks I have accepted some similar arguments in refusing an application for a declaration that a particular form of interim licence agreement would be FRAND in Lenovo Group Limited and others v InterDigital Technology Corporation and others [2024] EWHC 596 (Ch) However, it does not follow from the fact that I refused the application in Lenovo v InterDigital that the claim for Interim Declarations fails the merits test. The jurisprudence in this area is developing. Moreover, over the past few months a number of cases have come to the court in which implementers complain that SEP holders are using the threat of foreign injunctions as a means to secure supra-FRAND rates. I make no finding as to whether those complaints are justified in this or any other case. However, the fact that implementers are making these complaints suggests that there is some demand for a court-sponsored interim regime to regularise the position until FRAND licences or cross-licences are determined. Even though valid criticisms can be made of the Interim Declarations that Lenovo seeks, it is, in my judgment, too early to say that they fail the merits test."
(4) Interim Relief
(i) Interim Declarations
(ii) Interim Payments
"(1) The court may only make an order for an interim payment where any of the following conditions are satisfied—
(a) the defendant against whom the order is sought has admitted liability to pay damages or some other sum of money to the claimant;
(b) the claimant has obtained judgment against that defendant for damages to be assessed or for a sum of money (other than costs) to be assessed;
(c) it is satisfied that, if the claim went to trial, the claimant would obtain judgment for a substantial amount of money (other than costs) against the defendant from whom he is seeking an order for an interim payment whether or not that defendant is the only defendant or one of a number of defendants to the claim;
(d) the following conditions are satisfied— (i) the claimant is seeking an order for possession of land (whether or not any other order is also sought); and (ii) the court is satisfied that, if the case went to trial, the defendant would be held liable (even if the claim for possession fails) to pay the claimant a sum of money for the defendant's occupation and use of the land while the claim for possession was pending;…"
"1. Generally, interim payment procedures are not suitable where factual issues are complicated, or where difficult points of law arise;
2. This does not prevent an award being made even in respect of part of a complex claim if that part can be identified as what Mr. Justice Robert Walker calls 'an irreducible minimum part without venturing too far into the disputed area of fact or law';
3. It may well be appropriate simply to ignore certain heads of claim altogether while concentrating on those parts of the claim which can be assessed on established principles with some confidence;
4. While a broad brush approach to detail may be appropriate to an inquiry as to damages (see, for example, Gerber -v- Lectra [1997] RPC 443), at this stage it is also necessary to take a conservative view, however broad the brush employed is.
5. Even though the rule contains provision to accommodate over-payment, the extent to which comfort can be derived from the though that even if the amount awarded under heads that are considered at the interim stages excessive, the other unconsidered heads can make up for it is strictly limited. Hence, Mr. Justice Robert Walker's reference to 'the irreducible minimum' reflects a fundamental feature of the jurisdiction. All the same, I do not think that the phrase merely suggests that the sums awarded must be undisputed. There is room for a degree of uncertainty provided that it is treated in a conservative manner."
VI. The Issues
(1) Does performance of its FRAND Commitment in good faith require Panasonic to agree to enter into an Interim Licence on appropriate terms?
(2) Are the terms of the Interim Licence proposed by Xiaomi appropriate or is Panasonic's Non-Enforcement Proposal appropriate and sufficient to discharge its FRAND Commitment?
(3) Would declaratory relief serve a legitimate useful purpose?
(4) Is the English Court the appropriate forum to determine the Interim Licence Application?
(5) Is the Interim Licence Application limited to an application for summary relief pursuant to CPR Part 24 or CPR Part 25?
"1. The Claimant and Xiaomi Defendants having given the Reciprocal Undertakings, a willing licensor in the position of the Claimant, and a willing licensee in the position of the Xiaomi Defendants, would agree to enter, and would in fact enter, into the Interim Licence.
2. The Claimant and Xiaomi Defendants having given the Reciprocal Undertakings, and the Xiaomi Defendants having given the Interim Licence Undertakings, the Claimant is required to take the following steps in order to comply with its FRAND Commitment: agree to enter, and to enter, into the Interim Licence with the Xiaomi Defendants during the Interim Period.
3. The terms of the aforesaid Interim Licence are (i) the non-financial terms at Confidential Annex A to Panasonic's Amended FRAND SoC, as amended to provide for a term limited to the Interim Period, and (ii) the Reasonable Interim Royalty set out in the Confidential Annex 1 to this Order.
4. The Interim Licence shall be subject to the supervision of this Court and the Reciprocal Undertakings.
5. At the end of the Interim Period and subject to any directions to be given by the Court having determined the Court-Determined Licence (including as to the schedule applicable to any payments released pursuant to this paragraph), where the Xiaomi Defendants have paid the Reasonable Interim Royalty into Court, then: a. If the total sum of the Reasonable Interim Royalty paid by the Xiaomi Defendants (including any interest accrued) during the Interim Period exceeds the Court- Determined Royalty, the amount of the Court-Determined Royalty shall be released to the Claimant and the balance released to the Xiaomi Defendants; or
b. If the total sum of the Reasonable Interim Royalty paid by the Xiaomi Defendants (including any interest accrued) during the Interim Period is less than the Court- Determined Royalty, the sum paid into Court shall be released to the Claimant in part satisfaction of the Court-Determined Royalty.
6. In the event that the Claimant does not (i) undertake prior to the date of this Order to enter into the Interim Licence, or (ii) enter into the Interim Licence within 7 days of this Order, or (iii) undertake within 7 days of this Order to comply with the terms of the Interim Licence as if it was in full force and effect, the Claimant is in breach of its FRAND Commitment and is an unwilling licensor."
VII. Determination
(1) Does performance of its FRAND Commitment in good faith require Panasonic to agree to enter into an Interim Licence on appropriate terms?
"Panasonic's only conceivable rationale for eschewing the opportunity to enter into an Interim Licence in such circumstances is to avoid entering into the Court-Determined Licence in due course – and thus avoid the effect of the Undertaking that Panasonic so reluctantly gave to this Court at the Listing Hearing. Panasonic seeks to do this by putting Xiaomi to the invidious election, prior to the settlement of the Court-Determined Licence, of either (i) being taken off the market across Germany and/or 17 EU Member States or (ii) paying Panasonic supra-FRAND royalties. Panasonic refers to this as "commercial pressure" but it is nothing of the sort. It is holding Xiaomi to ransom, as was acknowledged by this Court during the Listing Hearing (see further below). Indeed, Panasonic clearly seeks to force this election even if the FRAND Trial in this jurisdiction has taken place and judgment is awaited, or following judgment but prior to the form of order hearing at which the licence terms to be signed are settled (notwithstanding the substantial time and millions of pounds that would have been spent, and thus wasted, on these proceedings by that time)."
"First, in circumstances where the parties have given the Reciprocal Undertakings such that they will enter into the English Court-Determined Licence, turning down cash on the table now (plus the protection of a further substantial bank guarantee) under the Interim Licence proposed by Xiaomi simply in order to keep alive the threat of injunctive relief can only be part of a strategy to pursue supra-FRAND rates. That is not consistent with the spirit of the FRAND Commitment. It is not performing the FRAND Commitment in good faith. The consequence is that good faith performance requires Panasonic to agree to take the money now and grant the Licence.
Second, and alternatively, there is no qualification of the temporal scope of Panasonic's obligation to grant FRAND licences. So Panasonic has an obligation under the FRAND Commitment, to grant Xiaomi a FRAND licence now. There are only two potential licences before the Court at this hearing: Xiaomi's proposed Interim Licence, which is fair and reasonable. And Panasonic's Updated Offer [i.e. the Non-Enforcement Proposal] – with a single lump sum payment for 2011-2029 – which is not for the reasons canvassed yesterday."
"MR. SCOTT: Indeed. Our position is that the FRAND commitment does not limit a party to a single avenue for achieving a FRAND licence. It sets an objective. It does not prescribe the means by which the objective is achieved. The FRAND trial in England is one of the means by which that objective may be achieved and, as I have said, we are committed to it, but there are others. The ongoing commercial negotiations between the parties are one other route. A further other route is the proceedings in Germany and the UPC, and nothing in the ETSI IPR policy or, indeed, our undertakings to the court, has tied our hands in any way from pursuing those other legitimate avenues. They may come to nothing, and if they do come to nothing we will have the FRAND trial here and we will enter into the licence settled by the court. However, it is in everyone's interests if a resolution can be achieved without the need for a long and expensive trial here, and the appeals that may well follow from it. Unless your Lordship is satisfied that we have no plausible, legitimate interest in seeking to achieve that outcome, my submission will be that your Lordship cannot be satisfied ----"
(i) Submission (A)
"20. Panasonic has given an unconditional undertaking to offer and, if accepted by Xiaomi in accordance with its undertaking, enter the Court-Determined Licence. Panasonic remains committed to that undertaking and stands ready and willing to comply with it if or when it is required to do so. That has not happened yet. It will never happen if the parties themselves agree a licence before the FRAND Trial. Even if they do not so agree, it is only after the Court has determined the relevant terms - i.e. after it has given judgment and made its consequential order following the FRAND Trial - that Panasonic will be bound to offer them.
21. Unless and until Xiaomi enters into a licence, however, (whether on terms bilaterally agreed or determined by the Court) it is infringing Panasonic's patents and liable to suit accordingly. Further, Panasonic considers that, until such time as Xiaomi is licensed on FRAND terms, it is legitimate for Panasonic to exercise its rights as patentee in the actions before the German Courts and the UPC. which will decide in accordance with their own respective laws and procedures whether to grant Panasonic the relief it claims, having considered the submissions and evidence submitted by Xiaomi (as well as Panasonic).
22. In this regard, Panasonic's position is that those foreign courts are the only appropriate fora to consider whether and if so what relief to grant in respect of patent infringement that is local to them. The German Courts and the UPC are, I believe, both competent to determine the proceedings that Panasonic has brought before them and well-respected internationally. Furthermore, my understanding from having been involved for over 20 years in English litigation concerning standard essential patents where there are parallel proceedings before the German courts, and from having watched the development of the rules and procedures of the Unified Patent Court for a number of years, is that any injunction granted in those jurisdictions would only be obtained once the relevant court has fully considered whether granting such an injunction would be consistent with its understanding of the FRAND regime, having taken account of the factual contexts of the parties' respective conduct both in terms of their negotiations, their licence offers and in the various ongoing proceedings (including these proceedings).
23. In the circumstances, Panasonic considers that it is entirely legitimate for it to ask the German courts and the UPC to apply their relevant procedures and law and to allow them to reach a decision as to whether Panasonic's rights have been infringed and, if so, what relief would in their respective views be appropriate in the light of both parties' obligations under the FRAND framework.
24. Panasonic does not view the proceedings in Germany and the UPC as "wasteful nor is Panasonic continuing them to put "undue pressure" on Xiaomi "with the aim of extracting excessive and supra- FRAND royalty terms from Xiaomi" (as suggested by Mr Baldwin at paragraphs 7, 31, 33 and 49). Panasonic considers that pursuing a claim for relief that would only be granted in circumstances where - in the light of all the relevant circumstances (including offers that have been made and the parties' conduct in those and other proceedings) - a court considers that relief to be appropriate and consistent with Panasonic's FRAND commitment, cannot put any "undue pressure" on Xiaomi. Further, if Xiaomi and Panasonic chose to settle between them a global licence in circumstances where the German court or UPC has held that the terms proposed by Panasonic are consistent with its FRAND commitment, then notwithstanding that Xiaomi might be subject to an injunction if it does not choose to do so, that would not be illegitimate or lead to any "supra FRAND" outcome.
25. In addition, the proceedings in Germany and the UPC will serve to establish important points, for example, about the full negotiation conduct of the parties (including prior to the commencement of litigation), under the leading case of Huawei v ZTE, which is an area that is far less of a focus in the English jurisprudence and is not being addressed in the FRAND Trial in these proceedings."
(1) Mr Boulton and Ms Osepciu did not suggest that Panasonic was acting in breach of the Panasonic Undertakings by continuing to prosecute the German Proceedings in both the UPC and the German courts. Indeed, they were careful not to do so (and in my judgment rightly so). Panasonic gave those undertakings to the Court not to Xiaomi to fulfil its FRAND Commitment.
(2) Moreover, Panasonic's counsel made it quite clear to Meade J that it was reserving its rights to prosecute the German Proceedings notwithstanding the Reciprocal Undertakings. The judge may have found this position unattractive but neither the Court nor Xiaomi could have been in any doubt what Panasonic's intentions were.
(3) I consider whether a contractual undertaking can properly be implied in the ETSI IPR Policy in considering Submission (B) below. But in the absence of a contractual undertaking or an undertaking to the Court, I see no reason why it should be considered illegitimate for Panasonic to enforce its legal rights to prevent the infringement of UPC or German registered patents in the German Courts with the aim of a negotiated settlement of all worldwide proceedings.
(4) I accept that in applying the Roadmap and deciding whether to grant an injunction the German Courts may not subject a SEP holder's offer to the same level of scrutiny as the English Court in fixing the terms of a Court-Determined Licence. I also accept that Panasonic intends to put commercial pressure on Xiaomi to accept the terms of its offer if it is free to pursue the German Proceedings. But I do not accept that this will necessarily result in "supra-FRAND" rates or even that there is a significant risk that they will do so.
(5) Professor Ann's evidence that an offer which was "not obviously un-FRAND" might in fact be a "supra-FRAND offer" was tentative only and I attach limited weight to it. He did not provide any evidence or statistics to support his conclusion or attempt to assess the risk that the German Courts might grant an injunction if a SEP Holder made a supra-FRAND offer and the implementer rejected it. I also accept the qualifications in Professor Meier-Beck's reply report. The Court scrutinises the SEP holder's offer to consider whether it is a serious and credible proposal and, if it is, then there is an obligation upon the implementer to engage.
(6) Moreover, with the greatest of respect to Professor Ann, this does not seem so very different from the approach which an English Court might take in infringement proceedings. In Nokia v Oppo Meade J accepted that the Court applies the standard of whether an offer is FRAND or not but because it is almost impossible to hit the nail on the head, it is usually found that the offer is not FRAND and the SEP holder meets that difficulty by giving an undertaking to be bound by a Court-Determined Licence: see [258] to [260] (above). A SEP holder can meet the same difficulty in the German Courts by offering to enter into a licence which includes a right to a Section 315 determination. Indeed, this is the effect of Panasonic's revised Non-Enforcement Proposal. I accept that there are differences of procedure, that they are significant and that they may lead to different outcomes. But I am not satisfied that there is a real risk that the German Proceedings will result in a supra-FRAND outcome.
(7) Moreover, there is nothing to prevent Xiaomi from relying on the Reciprocal Undertakings in the German Proceedings as evidence that it is a willing licensee. Neither Professor Ann nor Professor Meier-Beck gave evidence about the approach which the UPC or German courts might adopt once informed that Xiaomi had undertaken to accept a global Court-Determined Licence and the fact that the FRAND Trial is listed in October 2024. It is at least possible that the German Courts will hold that it is a breach of Article 102 for Panasonic to seek injunctive relief having agreed to the Reciprocal Undertakings. But this is a matter best left to the German Courts.
(1) Mr Boulton did not attempt to demonstrate to a high degree of assurance that Panasonic's royalty rate was obviously un-FRAND (although he relied on the fact that it had recently amended its case to plead a different figure). It was common ground that there is no single figure which is FRAND and that, in theory at least, a SEP holder may choose between different available licences: see UPCA at [121] to [125]. Although the Court of Appeal accepted that this was more of a theoretical problem than a real one it does make it very difficult for a party to demonstrate on an interim application and without detailed expert evidence that a party has made an un-FRAND offer.
(2) The principal difference between the parties was in relation to the period of the licence. Mr Boulton relied on the decision of Marcus Smith J in Optis Cellular Technology LLC v Apple Retail UK Ltd [2023] EWHC 1095 (Ch) ("Optis E I") for the proposition that the licence period should run from the date on which the SEP holder asserted its rights (or the implementer became aware of them): see [499] to [502]. Mr Scott relied on the decision of Mellor J in Interdigital v Lenovo II for the proposition that the licence period should cover all unlicensed sales: see [60](v). This issue is currently before the Court of Appeal and it is not possible for me to predict the outcome or to conclude that Panasonic's insistence that it should be paid for all unlicensed sales over a long period of infringement is unreasonable and supra-FRAND.
(3) Mr Boulton placed some reliance on Panasonic's small stack share and submitted that given that percentage, it was unreasonable for Panasonic to seek injunctive relief. However, he did not point to any clear authority that a limited stack share either had an effect on the overall royalty or rate or that the Court might refuse to grant an injunction to restrain patent infringement because of stack share. Marcus Smith J accepted in Optis v Apple I that stack share may have an effect in driving the price in a FRAND Licence but no more: see [86]. Mellor J also took stack share into account in Interdigital v Lenovo I in carrying out a "top-down cross-check": see [840] to [855]. But neither decision justified the conclusion that Panasonic's revised Non-Enforcement Proposal was supra-FRAND.
(ii) Submission (B)
(1) As stated above, I accept in principle that the obligation to act in good faith in the performance of a contract may lead to the creation or modification of substantive rights and that it would in theory be possible to imply an obligation to grant an Interim Licence (although there is no evidence that a French court has yet been prepared to do so).
(2) I am also prepared to accept that an Interim Licence falls with clause 6.1 of the ETSI IPR Policy and, in particular, that it falls within the description "irrevocable licences on fair, reasonable and non-discriminatory ("FRAND") terms and conditions". It follows that I reject Mr Scott's submission that an Interim Licence is not an irrevocable licence. I also reject his submission that a licence which contained a "true up" provision would not be a licence on FRAND terms and conditions provided that the provisional terms which take effect immediately are not obviously un-FRAND.
(3) However, I find it impossible to imply from the express words of clause 6.1 an obligation to grant an Interim Licence. The only express obligation imposed by clause 6.1 is to give an undertaking to the Director General of ETSI that the SEP holder is prepared to grant irrevocable licences. This language is intended to demonstrate a present intention to grant future rights. The FRAND Commitment is, therefore, a binding commitment to grant future rights if the SEP holder's offer is accepted.
(4) Mr Scott submitted that the only further obligation which the undertaking to ETSI imposes on the SEP holder is an obligation to make a FRAND offer which is capable of acceptance. I accept that submission: see Nokia v Oppo at [258]. Moreover, there was no authority to which I was taken that a SEP holder is required to make an offer in a particular form or to cover particular licence periods or, indeed, to make more than one offer to cover different periods. The only obligation is to make an irrevocable offer on FRAND terms.
(5) Moreover, English Courts have consistently interpreted the FRAND Commitment in this way: see UPHC at [143], Optis F at [73] and Nokia v Oppo at [254] (above). The significance of the FRAND Commitment is not that it gives rise to an immediate obligation to grant a licence on FRAND terms. Such an obligation will only arise if the implementer accepts the offer. If the implementer chooses not to accept the offer, it may prevent the grant of an injunction by making a counter-offer or by agreeing to accept a Court-Determined Licence.
(6) Again, I am prepared to accept that the French law doctrine of good faith in the performance of a contract imposes a duty on Panasonic not to frustrate its FRAND Commitment or the underlying purpose of the ETSI IPR Policy. But I do not accept that the exercise by Panasonic of its legal rights in a court of competent jurisdiction with a view to negotiating a licence on FRAND terms can be characterised as an attempt to frustrate its FRAND Commitment. Although there are clear differences between the law and procedure of the German Courts and the law of procedure of the English Courts I do not accept that the negotiation model of the UPC and German Courts does not achieve "a fair balance between the interests of implementers and owners of SEPs": see UPCA at [7] (above).
(7) Moreover, there are obvious difficulties in requiring a SEP holder to grant an Interim Licence. Mr Boulton did not formulate the precise term which he submitted should be implied into the ETSI IPR Policy and I have found it impossible to formulate a term which would be sufficiently certain and which would not lead to satellite litigation or mini-trials to determine the terms of the Interim Licence in advance of the FRAND trial to fix the Court-Determined Licence. I explore these difficulties in addressing Question (2) (below). But I have in mind Meade J's words of caution in Optis F at [275]:
"…clause 6.1 applies to parties of all kinds and sizes, and has effect internationally. It has to be applied in relation to the UK, which is the task facing me, but also around the world, and its interpretation should therefore not be undertaken exclusively or excessively through the lens of UK litigation practice. Other territories will not have the situation where there is a significant gap between finding validity and essentiality and then later FRAND terms."
(8) Finally, I am not satisfied to a high degree of assurance that it is consistent with the spirit of the ETSI IPR Policy to require a SEP holder to grant an Interim Licence as soon as the implementer agrees to accept a Court-Determined Licence. In my judgment, Xiaomi's argument is much the same as the argument which Apple ran in Optis F and which both Meade J and the Court of Appeal rejected. Apple argued that any implementer who sought a licence in good faith was protected against injunctive relief until the Court had fixed terms which were FRAND. Meade J held on the detailed evidence before him that this would promote hold out. The Court of Appeal held that the underlying purpose of the ETSI IPR Policy was to promote negotiation and that Apple's interpretation of clause 6.1 would undermine the incentive identified by the Supreme Court in UPSC to negotiate in a meaningful way: see [73] and [74]. If an implementer could count on an Interim Licence, it could very well have a similar effect and affect the fair balance (above).
(2) Are the terms of the Interim Licence proposed by Xiaomi appropriate or is Panasonic's Non-Enforcement Proposal appropriate and sufficient to discharge its FRAND Commitment?
(1) Declaration 1 is framed in hypothetical terms. This Court is normally resistant to answering hypothetical questions: see Clarke v Fennoscandia Ltd (No 4) (above). But in any event, the way in which the declaration is framed illustrates the difficulty. It assumes that a willing licensor would enter into an Interim Licence. But Panasonic's position is that it is a willing licensor for the purpose of both the English and the German Proceedings having given the Panasonic Undertakings and fortified this with the Non-Enforcement Proposal and then the revised Non-Enforcement Proposal. It is impossible to resolve this issue on these Applications without, in effect, deciding many of the issues which will be live at the FRAND Trial.
(2) Moreover, Mr Scott was very careful to make it clear that the Non-Enforcement Proposal and the revised Non-Enforcement Proposals were not counter-offers of an Interim Licence but a basis on which Panasonic would be prepared to undertake not to enforce its rights in the German Courts (and this is why I have defined it as I have). Indeed, I understood it as an assurance that it would not seek to extract supra-FRAND rates in the German Proceedings by offering to submit to the Orange Book procedure. This goes to show that Declaration 1 is not simply limited to assessing the terms of the proposed Interim Licence.
(3) Declarations 2 and 3 assume that the only appropriate terms of an Interim Licence are those offered by the Xiaomi Defendants. I was initially attracted by Mr Boulton's submission that Xiaomi had made a "simple and generous" offer which matched the "irreducible minimum" to which Panasonic will be entitled at trial and that a retrospective true-up mechanism protected Panasonic's legitimate interests pending trial. But as Mr Scott pointed out, in UPCA the Court of Appeal rejected Birss J's conclusion that there can only be one set of FRAND terms: see [121]. If Panasonic's offer was FRAND, it complied with its FRAND Commitment by making an offer on those terms. This shows that Declarations 2 and 3 are not limited to assessing whether the implementer's Interim Licence terms are both FRAND and reasonable but also whether the SEP holder's terms are un-FRAND and unreasonable.
(4) Finally, the task of deciding whether Xiaomi's Interim Licence terms were appropriate would also have required the Court to second-guess many of the issues which Meade J will have to decide at the FRAND Trial. This can be illustrated by the changes which Xiaomi made to its terms during the hearing. It began by offering to pay Panasonic's royalty rate but for Xiaomi's licence period by reference to the table in Baldwin 11. But its revised offer based on the same table involved Xiaomi's royalty rate for Panasonic's licence period. This illustrates the raft of different issues and terms which the Court will face if any implementer which agrees to take a Court-Determined Licence, is in principle entitled to an Interim Licence under the ETSI IPR Policy.
(3) Would declaratory relief serve a legitimate useful purpose?
(1) The parties had not agreed reciprocal undertakings to be bound by a Court-Determined Licence whether by the English Court or a foreign court and whether at first instance or on appeal.
(2) The proceedings had been initiated by the implementer rather than the SEP holder. But in the present case there was no dispute that the English Court was the appropriate forum for the determination of FRAND terms.
(3) The Court was not being asked (as it is here) to make declarations in relation to the SEP holder's obligations under the FRAND Commitment or the conduct of a willing licensor.
(4) The applicant was asking for an interim rather than a final declaration that the royalty rate was FRAND.
"a. Clarifying the parties' rights and obligations under the FRAND Commitment and, accordingly, the consequences of those rights and obligations as regards Xiaomi's willingness, and Panasonic's unwillingness, as licensee and licensor (respectively).
b. Enabling a FRAND licence to be settled by this Court without the application of undue pressure on Xiaomi - created by the pursuit and/or (threat of) enforcement of injunctive relief not only in Germany and the UPC, but also in other international foras - to agree to a licence covering the Panasonic Portfolio on supra-FRAND terms prior to the Court-Determined Licence being available in these proceedings.
c. By virtue of (a) and (b) above, protecting the integrity and utility of the FRAND determination (covering a substantial number of UK SEPs included in the Panasonic Portfolio) to be made in Panasonic's chosen forum in these proceedings to which Panasonic and Xiaomi have each unconditionally committed by way of the Reciprocal Undertakings.
d. Ensuring that declared Interim Licence terms are made available to Xiaomi and, thus ensuring that a FRAND licence will be available to Xiaomi within twelve months, which will assist in creating a balanced system between SEP holders and implementers, based on the ETSI IPR Policy (see below) and in facilitating the successful development of a SEP licensing ecosystem that works for the entire global SEP industry.
e. Ensuring that the unconditional undertakings provided to this Court cannot be circumvented by Panasonic (see paragraph 56 above) whilst also giving Panasonic the opportunity (in the event that it signs the Interim Licence) to receive payment from Xiaomi earlier than would otherwise be the case pursuant to the Court-Determined Licence. Indeed, such payment would be for a "generous" payment for more money than it would otherwise be entitled to for the Interim Period following settlement of the Court-Determined Licence.
f. By virtue of (a) - (e) above, furthering the aims of the ETSI IPR Policy including the broadest possible adoption of ETSI standards which is promoted by (i) parties entering into worldwide licences, covering UK SEPs, on FRAND terms and (ii) implementers being provided maximum possible access to the international ETSI standards, including in the UK to the benefit of UK consumers. As such, the Interim Licence Declarations serve to preserve this Court's ability to declare at the FRAND Trial the worldwide FRAND terms on which Xiaomi can access the Panasonic Portfolio as relevant to those international ETSI standards.
g. Offering Xiaomi a degree of protection against interest payments under the Court-Determined Licence. This was recognised as a relevant benefit in Lenovo v IDC.
h. Ensuring (in the event that the Interim Licence Declarations are made and Panasonic enters into the Interim Licence as required by the FRAND Commitment) that Xiaomi is put into the position of being licensed to the Panasonic Portfolio (including its UK SEPs), in circumstances where Xiaomi has unconditionally committed to be so licensed, there will be a FRAND Trial in October 2024 and it is guaranteed that Xiaomi will be licensed for this same Interim Period. In other words, the Interim Licence will effect a licence for the Interim Period, in circumstances where Xiaomi will be licensed for this same period of time within twelve months from now. In performing its last minute volte-face on its refusal to offer an Interim Licence, it appears that Panasonic has realised the inherently contradictory nature of its position in this regard, whereby it was refusing to provide a licence to Xiaomi in circumstances where it had unconditionally agreed that Xiaomi will be licensed for that same period."
"81. As regards paragraphs 80(a)-(e), the Interim Licence Declarations will achieve those purposes in particular in one of two ways:
a. In the event that the Interim Licence Declarations are made and Panasonic enters into the Interim Licence as required by the FRAND Commitment, Xiaomi will have a full defence to any claims for injunctive relief whether currently pending or yet to be issued. Panasonic is not understood to dispute this in principle; but takes the position that it will not enter into an Interim Licence even if that is required by the FRAND Commitment. That position is addressed below.
b. If Panasonic does not enter into the Interim Licence notwithstanding the Interim Licence Declarations, Xiaomi maintains that the making of the Interim Licence Declarations will be relevant to the assessment in the German and UPC proceedings of whether Panasonic is a willing licensor that should be granted injunctive relief (and thus to protecting the integrity and utility of the FRAND determination process in these proceedings).
82. Contrary to Panasonic's contention, removing the threat of injunctive relief against Xiaomi is a benefit in these proceedings. It protects the investment of significant time and resource made by the parties and Court in the (expedited) FRAND determination in these proceedings to which the parties have unconditionally committed via the Reciprocal Undertakings. The utility and integrity of that FRAND determination, which covers Panasonic's UK SEPs amongst others, would be undermined were Xiaomi forced by the (threat of) enforcement of injunctions to agree to supra-FRAND terms before the Court- Determined Licence is available (but, quite possibly, after all or the majority of the costs of the FRAND Trial in these proceedings had been sunk)."
"MR. SCOTT: We say the present case exhibits important similarities to TQ Delta. Just as the implementer in TQ Delta had no interest in a licence to the UK patents, we have made it clear that we have no interest in an interim licence. Just as there was no need in TQ Delta to determine licence terms in order to decide what relief to grant in a claim for patent infringements, likewise there is no need in the present case to decide whether or not we are obliged to issue an interim licence in order to determine the questions that remain before this court in this action. Your Lordship's declarations and determinations will have no bearing if granted on the issues at the FRAND trial, none whatsoever. The only hint of a suggestion that they might was a point taken about interest that you see, I think, in Mr. Baldwin's 11th statement. It was addressed in response by Mr. Jelf in his third and it is also addressed in our skeleton. While I am continuing through my submissions, perhaps Ms. Jamal can find the reference to where we deal with the interest points. However, interest aside, there is no suggestion that in the context of these English proceedings, these declarations will have any bearing. MR. JUSTICE LEECH: Except that they will declare that he has either got a contract or he is entitled to one. MR. SCOTT: So what? It will have no significance at all to the issues that arise for resolution in this action. That is because the effect of both parties having given the reciprocal undertakings is that no question of willingness arises here. The only question that remains for determination on the FRAND part of the case is what terms are fair, reasonable and non-discriminatory."
(1) There is no need to clarify the parties' respective rights and obligations in this jurisdiction or take steps to preserve the integrity of these proceedings ahead of the FRAND Trial: see paragraphs 81(a) and (c). Panasonic has entered into the Reciprocal Undertakings and agreed to be bound by the Court-Determined Licence. It has not asked the Xiaomi Defendants to pay licence fees now or threatened to apply for an injunction if they fail to do so. It has made it clear that it will accept a retrospective licence and rely on any rights which it may have to claim interest.
(2) The only real purpose in granting the declarations, therefore, would be to influence the outcome of the German Proceedings. Indeed, Mr Boulton and Ms Osepciu accepted that the declarations would prevent undue pressure being put on the Xiaomi Defendants by the threat of an injunction or its enforcement in the UPC and the other relevant jurisdictions and to give them a complete defence in the German Proceedings: see paragraphs 80(b) and 81(a).
(3) For reasons which I have already given I am not satisfied to a high degree of assurance that it would be consistent with the spirit of the ETSI IPR Policy to compel Panasonic to grant an Interim Licence. But even if I were, it is not for this Court to dictate to the German Courts how they should interpret an international policy governed by French law or further its underlying aims and objectives: see paragraphs 81(d) and (f). Moreover, French law is a question of fact and the German Courts are just as well-placed as this Court to construe and apply the ETSI IPR Policy.
(4) The fact that the Court-Determined Licence will be retrospective is a reason to refuse the declarations not to make them: see paragraph 80(h). It demonstrates that there is no gap for this Court to fill. I also reject the argument that the declarations will reduce Xiaomi's exposure to interest: see 80(g). Richards J rejected the same argument in Interdigital v Lenovo III and Mr Boulton did not suggest that Meade J did not have the discretion to refuse to award Panasonic interest for the period between now and trial because it had refused to accept Xiaomi's various offers (including the offer of an Interim Licence).
(5) Furthermore, there is no useful purpose in declaring that a willing licensor would grant an Interim Licence: see paragraph 81(b). Floyd LJ rejected a very similar argument in TQ Delta for reasons which carry equal weight in the present case: see [47] to [52]. I reject the argument that the English and German Proceedings are not competing or inconsistent because the German Courts will not be bound by any declarations which the Court makes and in my judgment there is a "strong flavour of anti-suit" about them (to use Meade J's description). There is no evidence that German Courts require assistance from the English Courts or, indeed, that they will treat a hypothetical declaration by me that a willing licensor would grant an Interim Licence as any other than an attempt to interfere with the integrity of the German Proceedings and Professor Ann did not suggest otherwise.
(6) But even if Xiaomi had been able to overcome all of these objections, there is one powerful reason why it would be an exercise in jurisdictional imperialism to make the declarations. As Mr Scott pointed out, the German Courts are the only courts in which Panasonic has rights to bring proceedings for infringement of their UPC and German registered patents. Xiaomi's case is that Panasonic has a contractual obligation under the ETSI IPR Policy to grant it an Interim Licence the effect of which will be to prevent it from enforcing those rights and give it a complete defence to Panasonic's claims: see paragraph 81(a). This is a strong reason in itself to doubt that Xiaomi's construction of clause 6.1 is correct. But if that is the effect of the ETSI IPR Policy then the obvious place to raise this defence is in the German Proceedings themselves: see Deutsches Bank (above) at [56]. This is the natural and obvious forum to take this defence and comity requires an English Court to leave it to the German Courts to assess the validity of that defence.
(7) Finally, I agree with Mr Boulton and Ms Osepciu that Interdigital v Lenovo III was a very different case for the reasons which they gave and, for this reason, it provides useful guidance only. I also agree that there are stronger reasons for the Court to grant an Interim Licence in the present case because the parties have agreed the Reciprocal Undertakings and to be bound by the Court-Determined Licence and the Court in that case was asked to make interim declarations only. However, like Richards J in Interdigital v Lenovo III, I take the view that the question whether the Reciprocal Undertakings provide a defence in the German Proceedings is one for the German Courts and not me.
(4) Is the English Court the appropriate forum to determine the Interim Licence Application?
(5) Is the Interim Licence Application limited to an application for summary relief pursuant to CPR Part 24 or CPR Part 25?
VIII. Disposal
